SB-2/A

As filed with the Securities and Exchange Commission on July 12, 2002

Registration No. 333-88550

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

PRE-EFFECTIVE AMENDMENT NO. 1

FORM SB-2

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

NuTECH DIGITAL, INC.

(Exact Name of Registrant as Specified in Its Charter)

California		95-4642831
(State or Other Jurisdiction	(Primary Standard Industrial	(I.R.S. Employer
of Incorporation or Organization)	Classification Code Number)	Identification No.)

7900 Gloria Avenue, Van Nuys, California 91406

Telephone: (818) 994-3831

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

LEE KASPER

President and Chief Executive Officer

NuTech Digital, Inc.

7900 Gloria Avenue, Van Nuys, California 91406

Telephone: (818) 994-3831

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies of communications to:

MARY ANN SAPONE, ESQ.

Pollet, Richardson & Patel, 10900 Wilshire Boulevard, Suite 500

Los Angeles, CA 90024

Telephone: (310) 208-1182

Telecopier: (310) 208-1154

Approximate date of commencement of proposed sale to the public:    As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  x

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box.  ¨

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered	Amount to be Registered	Proposed maximum offering price per unit	Proposed maximum aggregate offering price(1)	Amount of registration fee
Common stock, no par value	5,226,586	$1.50	$7,839,879	$721.27
Common stock underlying the warrants sold in a private offering dated June 1, 2001	703,444	$3.00	$2,110,332	$194.15

(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information that is different. This prospectus may be used only where it is legal to sell these securities. The information in this prospectus is complete and accurate as of the date on the front cover, but the information may have changed since that date.

NuTECH DIGITAL, INC.

5,930,030 Shares of Common Stock

NuTech Digital, Inc. is registering 2,500,000 shares of its common stock, no par value, for sale to investors at a price of $1.50 per share, or $3,750,000 if the total offering is sold. This is our initial public offering. The shares being sold for the benefit of NuTech Digital, Inc. will be offered by our Chief Executive Officer and President, Mr. Lee Kasper, on a best efforts basis with no minimum. In the event that we elect to sell these securities through an underwriter or broker-dealer, we may pay a cash fee of up to 10% of the proceeds, resulting in proceeds to NuTech Digital, Inc. of $1.35 per share, or $3,375,000 if the total offering is sold. There are no minimum purchase requirements. All proceeds received from the sale of the common stock will be distributed directly to us. We have no arrangements to place the funds in an escrow, trust or similar account. This offering will end on the date that all of the shares of common stock offered are sold.

This prospectus also covers the resale of 2,726,586 shares of our common stock and 703,444 shares of our common stock issuable upon the exercise of warrants. Although a specific price cannot be determined at this time, we have estimated a price range for the sale of these shares to be from $1.50 to $3.00. However, there can be no guarantee or assurance that this will be the share price at any given time in the future. Once our shares are quoted on the OTC Bulletin Board, the selling shareholders may sell at prevailing market prices or privately negotiated prices. If all of the selling shareholders exercised their warrants, we would receive $2,110,332. Although we will receive proceeds from the exercise of the warrants, we will not receive any of the proceeds from the sale of the shares sold by the selling shareholders.

The common stock of NuTech Digital, Inc. is not currently listed on any securities exchange.

An investment in our securities involves a high degree of risk. You should purchase our securities only if you can afford a complete loss of your investment. See “Risk Factors” beginning at page 3.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is July             , 2002

NuTECH DIGITAL, INC.

Table of Contents

	Page No.
Prospectus Summary	1
Risk Factors	3
Forward Looking Statements	8
Use of Proceeds	8
Determination of Offering Price	9
Dilution	10
Selling Shareholders	12
Plan of Distribution	14
Legal Proceedings	14
Directors, Executive Officers, Promoters and Control Persons	15
Security Ownership of Certain Beneficial Owners and Management	17
Description of Securities to be Registered	18
Interests of Named Experts and Counsel	19
Disclosure of Commission Position on Indemnification for Securities Act Liabilities	19
Organization	19
Description of Business	20
Description of Property	24
Management’s Discussion and Analysis of Financial Condition	25
Certain Transactions	30
Market for Common Equity and Related Shareholder Matters	30
Executive Compensation	32
Index to Financial Statements	F-1

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PROSPECTUS SUMMARY

This summary highlights important information about our business and about this offering. Because it is a summary, it does not contain all the information you should consider before investing in our securities. Please read the entire prospectus.

NuTech Digital, Inc.

We are engaged in creating, licensing and distributing general entertainment products, most of which are made available through digital versatile discs, which are commonly known as DVDs. Our products include children’s animated films and video games, karaoke software, Japanese anime and late night programming. Our products are sold through retail stores, the Internet, and wholesale distributors.

How to Contact Us

We maintain our principal offices at 7900 Gloria Avenue, Van Nuys, California 91406. Our telephone number at that address is (818) 994-3831 and our facsimile number is (818) 994-1575.

The Offering

The number of shares of common stock outstanding prior to this offering is 10,380,169.

Common Stock offered by NuTech Digital, Inc. (“NuTech’s Offering”):

We are registering to sell to new investors up to 2,500,000 shares of common stock. We will sell the common stock to new investors at $1.50 per share. If we engage the services of an underwriter or broker-dealer, we may pay a cash fee of up to 10% of the proceeds, resulting in proceeds to us of $1.35 per share.

Shares offered by Selling Shareholders:

We are registering 3,430,030 shares of our common stock for sale by selling shareholders identified in the section of this prospectus entitled “Selling Shareholders”, each of whom acquired shares of our common stock from us prior to this offering. The shares included in the table identifying the selling shareholders include 703,444 shares of common stock that have not yet been, but that may be, issued to designated selling shareholders upon the exercise of warrants. These warrants were issued in conjunction with a private offering of units composed of our common stock and warrants to purchase our common stock, which we undertook on June 1, 2001.

After this offering (including the offering made by the selling shareholders), we will have 12,880,169 shares of common stock outstanding. Of this amount, 5,226,586 will be freely tradable shares of common stock. These numbers exclude:

• 703,444 shares of common stock issuable upon the exercise of warrants issued in conjunction with our private offering; and

• 1,705,000 shares of common stock issuable upon the exercise of options issued in connection with our NuTech Digital, Inc. 2001 Equity Incentive Plan.

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Summary of Financial Information

	December 31,				March 31,
Statement of Operations	2001		2000		2002			2001
Sales	$	5,021,232	$	4,186,673	$	1,111,471		$	962,039
Costs of Sales		1,134,862		935,310		308,132			272,385
Gross Profit		3,886,370		3,251,363		803,339			689,654
Selling, General and Administrative Expenses		3,430,563		2,188,096		883,271			580,251
Operating Income (Loss)		455,807		1,063,267		(79,932	)		109,403
Interest Expense		253,717		203,088		66,174			50,914
Income Before Income Taxes (Benefit)		202,090		860,179		(146,106	)		58,489
Income Taxes		34,909		0		(57,426	)		0
Net Income (Loss)	$	167,181	$	860,179	$	(88,680	)	$	58,489
Net Income per Common Share
Basic and Diluted Income Per Share	$	.02	$	.10	$	(.01	)	$	.01
Weighted Average Number of Common Shares Outstanding		8,992,496		8,300,250		10,097,440			8,300,250

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RISK FACTORS

An investment in our securities is very speculative and involves a high degree of risk. You should carefully consider the following risk factors, along with the other matters referred to in this prospectus, before you decide to buy our securities. If you decide to buy our securities, you should be able to afford a complete loss of your investment.

We will continue to need money to fund future operations, and we are not sure we can obtain additional financing.

We believe that our current and future available capital resources, including cash flow from operations, will be adequate to fund our working capital requirements in the ordinary course of business for the 12 month period following the date of this prospectus. However, we cannot assure you that future events will not cause us to seek additional capital sooner. To the extent that we need more money, we cannot assure you that funds will be available to us on favorable terms, or at all. To the extent that additional money is raised through the sale of our securities, the issuance of those securities could result in dilution to our shareholders. The unavailability of funds could have a material adverse effect on our ability to expand our operations.

If we are able to borrow money in the future, any such indebtedness could affect our financial health.

It is likely that we will incur indebtedness from time to time to continue expanding our film library. This debt could have adverse consequences for our business, including:

• We will be more vulnerable to adverse general economic conditions;

• We may be required to dedicate a substantial portion of our cash flow from operations to repayment of debt, limiting the availability of cash for other purposes;

• We may have difficulty obtaining additional financing in the future for working capital, capital expenditures, general corporate purposes or other purposes;

• We could be limited by financial and other restrictive covenants in our credit arrangements in our borrowing of additional funds; or

• We may fail to comply with the covenants under which we borrowed our indebtedness, which could result in an event of default. If an event of default occurred and was not cured or waived, it could result in all amounts outstanding, together with accrued interest, becoming immediately due and payable. If we were unable to repay such amounts, the lender could proceed against any collateral granted to it to secure the indebtedness.

In order to be successful, we must manage our growth. We cannot assure you that we will manage our growth effectively.

We anticipate that we will be entering a period of significant growth. If a period of significant growth occurs, it will expose us to greater overhead, marketing and support costs and other risks associated with the development of new products. To manage our growth effectively, we will need to continue to improve and expand our operational, financial and management information systems and to hire and manage additional personnel. We cannot assure you that we will be able to effectively do this. By the end of the 2002 fiscal year, we anticipate that we must add a webmaster, a chief financial officer and a sales representative.

We are dependent for our success on a few employees. The loss of one or more of these employees could have an adverse effect on our operations.

Our future success will depend, to a significant degree, on the continued services of our executive officers and other key personnel, particularly our founder, Mr. Lee Kasper, and our Vice President, Mr. Joseph Giarmo,

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and on our ability to continue to attract, motivate and retain highly qualified and talented personnel. We do not have, and currently we do not intend to acquire, key-man life insurance on the lives of Mr. Kasper or Mr. Giarmo. The loss of Mr. Kasper’s or Mr. Giarmo’s services would have a material adverse effect on our business and operations.

Our industry is intensely competitive. We cannot guarantee you that we can compete successfully.

Our business is highly competitive. We must compete with all the other existing forms of entertainment including video arcade games, home video games, theme parks, nightclubs, television, and CDs. All aspects of our business, including pricing, promptness of service, and product quality are significant competitive factors and our ability to successfully compete with respect to each factor is material to our profitability. Our competitors may develop products or services that may be more popular than our products or services and they may be more successful in marketing their products or services than we are in marketing ours. Some of our current and potential competitors have significantly greater market presence, name recognition and financial resources than we have, and many have longstanding market positions and established brand names in their respective markets. Pricing competition could result in lower margins for our products. Although we place a high value upon our ability to provide quality products and services to our customers in order to be competitive in the market place, we cannot assure you that we will be able to compete successfully in our markets, or compete successfully against current and new competitors as our market continues to evolve.

The market in which we do business may change, decreasing the demand for our products.

Our DVD products compete with pay-per-view cable television systems, in which cable television subscribers pay a fee to see a movie or other program selected by the subscriber. Existing pay-per-view services offer a limited number of channels and programs and are generally available only to households with a converter to unscramble incoming signals. Recently developed technologies, however, permit certain cable companies, direct broadcast satellite companies, telephone companies and other telecommunications companies to transmit a much greater number of movies to homes in more markets. Ultimately, further improvements in these technologies or the development of other technologies, such as Internet-TV, could lead to the availability of a broad selection of movies to consumers on demand at low prices, which could substantially decrease the demand for DVD-video purchases or rentals. This could have a material adverse effect on our financial condition and results of operations.

We rely on sales to key customers, which subjects us to risk if we lose their business.

As a percentage of total revenues, our net sales to our nine largest customers during the fiscal years ended December 31, 2001 and 2000 were approximately 37.6% and 45% respectively. One major customer accounted for approximately 10.4% of our revenues in fiscal 2001 and approximately 23% in fiscal 2000. Although we have long-established relationships with many of our customers, we do not have long-term contractual arrangements with any of them. A decrease in business from any of our major customers could have a material adverse effect on our results of operations and financial condition.

We could become involved in litigation over our rights to use our products, or the rights of others to use our products.

We are not aware that any of our products infringe the proprietary rights of third parties, and we are not currently engaged in any material intellectual property litigation or proceedings. Nonetheless, we cannot assure you that we will not become the subject of infringement claims or legal proceedings by third parties with respect to our current or future products. In addition, we may initiate claims or litigation against third parties for infringement of our proprietary rights, or to establish the validity of our proprietary rights. Any such claims could be time-consuming, result in protracted litigation, cause product shipment delays or lead us to enter into royalty or licensing agreements rather than disputing the merits of such claims. Moreover, an adverse outcome in

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litigation or similar adversarial proceedings could subject us to significant liabilities to third parties, require expenditure of significant resources to develop non-infringing products, require disputed rights to be licensed from others or require us to cease the marketing or use of certain products, any of which could have a material adverse effect on our business and operating results. To the extent that we want to or are required to obtain licenses to proprietary rights of others, we cannot assure you that any such licenses will be made available on terms acceptable to us, if at all.

Government regulations could have an adverse effect on a portion of our business.

During 2001, approximately 18.12% of our sales were from late night programming. Although the right to create material containing late night programming is protected by the First and Fourteenth Amendments to the United States Constitution, the First and Fourteenth Amendments do not protect the dissemination of this material, and several states and communities in which our products are distributed have enacted laws regulating the distribution of late night programming with some offenses designated as misdemeanors and others as felonies, depending on numerous factors. The consequences for violating the state statutes are as varied as the number of states enacting them. Similarly, there is a federal prohibition with respect to the dissemination of late night programming, and the potential penalties for individuals (including corporate directors and officers) violating these federal laws include fines, community service, probation, forfeiture of assets and incarceration. Although we undertake to restrict the distribution of our products in order to comply with all applicable statutes and regulations, we cannot assure you that our efforts will be successful and that we will always comply with all applicable state and federal statutes and regulations.

Some of our products include sexually explicit content, which may subject us to additional future regulation or other legal challenges.

Some of our products include sexually explicit material. Many people may regard this division of our business as unwholesome. This may negatively impact the value of our common stock. Federal, state and municipal governments, along with various religious and children’s advocacy groups, consistently propose and pass legislation aimed at restricting provision of, access to, and content of late night entertainment. These groups also may file lawsuits against providers of late night entertainment, encourage boycotts against such providers, and mount negative publicity. We cannot assure you that sales of these products will not be subject to successful legal challenges in the future.

Sales of our common stock by the selling shareholders in a concurrent offering may depress our stock price.

Concurrent with the offer and sale of our common stock, our selling shareholders may offer for sale, from time to time, 3,430,030 shares of our common stock (assuming the full exercise of all warrants). Upon completion of NuTech’s offering and the offering by the selling shareholders, we will have outstanding 5,930,030 freely tradable shares of common stock (assuming the full exercise of all warrants by the selling shareholders) in the public market. Sales of a substantial number of shares of our common stock by the selling shareholders within a relatively short period of time could have the effect of depressing the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities.

We have not paid cash dividends and it is unlikely that we will pay cash dividends in the foreseeable future.

We plan to use all of our earnings, to the extent we have earnings, to fund our operations. We do not plan to pay any cash dividends in the foreseeable future. We cannot guarantee that we will, at any time, generate sufficient surplus cash that would be available for distribution as a dividend to the holders of our common stock. You should not expect to receive cash dividends on our common stock.

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We have the ability to issue additional shares of our common stock without asking for shareholder approval, which could cause your investment to be diluted.

Our Articles of Incorporation currently authorize the Board of Directors to issue up to 100,000,000 shares of common stock. The power of the Board of Directors to issue shares of common stock or warrants to purchase shares of common stock is generally not subject to shareholder approval. Accordingly, any additional issuance of our common stock may have the effect of further diluting your investment.

If you purchase the securities we are offering, the value of your purchase will be immediately diluted.

You will experience immediate and substantial dilution in the net tangible book value of the securities that you purchase. As of March 31, 2002, we had a net tangible book value of $1,301,831 or $0.13 per share of issued and outstanding common stock. After giving effect to the sale of the common stock we are offering, the net tangible book value at that date would have been $5,042,380 or $0.40 per share. This represents an immediate increase in net tangible book value of $0.27 per share to existing shareholders and an immediate dilution of $1.10 per share to the investors in this offering. See the section of this prospectus entitled “Dilution.”

We may raise additional capital through a securities offering that could dilute your ownership interest.

We require substantial working capital to fund our business. If we raise additional funds through the issuance of equity, equity-related or convertible debt securities, these securities may have rights, preferences or privileges senior to those of the holders of our common stock. The issuance of additional common stock by our management will also have the effect of further diluting the proportionate equity interest and voting power of holders of our common stock, including investors in this offering.

A majority of our capital stock is owned by our executive officers and directors, which will allow them to control the outcome of matters submitted to our shareholders for vote.

As of the date of this prospectus, management owns the majority of our issued and outstanding shares of capital stock. Immediately after the sale of all of the securities offered in NuTech’s offering, management will beneficially own approximately 64% of the issued and outstanding capital stock, and investors and other remaining shareholders will beneficially own approximately 36% of the issued and outstanding capital stock (not including the common stock represented by outstanding warrants and options). Because management owns a majority of the capital stock, even though the holders of common stock are entitled to cumulate their shares when voting for directors, management will retain the ability to elect a majority of the Board of Directors, and thereby control our management. Although they are under no obligation to do so, if our executive officers and directors (and their affiliates) were to vote together, they would also have the ability to control the outcome of corporate actions requiring shareholder approval, including mergers and other changes of corporate control, going private transactions, and other extraordinary transactions. This concentration of ownership may have the effect of delaying or preventing a change of control, even if a change of control would benefit shareholders.

Management will have broad discretion in using the proceeds received from NuTech’s offering. You may not approve of the ways in which management uses those proceeds.

We expect to use the net proceeds of NuTech’s offering primarily for acquiring more licenses for our library of animated works, to begin production of music videos, to retire debt, and for other general corporate purposes. Management will retain broad discretion as to the allocation of the proceeds of NuTech’s offering. You may not approve of the uses to which management allocates the money. Management’s failure to effectively use this money could have a material adverse effect on our business and financial condition. See the section of this prospectus entitled “Use of Proceeds.”

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There is no public market for our securities, so you will be unable to liquidate them if you need money.

Prior to this offering there has been no public market for our common stock. It is not likely that an active market for our common stock will develop or be sustained after this offering or in the foreseeable future.

If a public market for our common stock develops, it may be volatile. This may affect the ability of our investors to sell their shares as well as the price at which they sell their shares.

If a market for our common stock develops, the market price for the shares may be significantly affected by factors such as variations in quarterly and yearly operating results, general trends in the entertainment industry, and changes in state or federal regulations affecting us and our industry. Furthermore, in recent years the stock market has experienced extreme price and volume fluctuations that are unrelated or disproportionate to the operating performance of the affected companies. Such broad market fluctuations may adversely affect the market price of our common stock.

We will be subject to the Penny Stock Rules and these rules may adversely affect trading in our common stock.

Our common stock will be considered a “low-priced” security under rules promulgated under the Securities Exchange Act of 1934. In accordance with these rules, broker-dealers participating in transactions in low-priced securities must first deliver a risk disclosure document which describes the risks associated with such stocks, the broker-dealer’s duties in selling the stock, the customer’s rights and remedies and certain market and other information. Furthermore, the broker-dealer must make a suitability determination approving the customer for low-priced stock transactions based on the customer’s financial situation, investment experience and objectives. Broker-dealers must also disclose these restrictions in writing to the customer, obtain specific written consent from the customer, and provide monthly account statements to the customer. The effect of these restrictions will likely be a decrease in the willingness of broker-dealers to make a market in our common stock, decrease liquidity of our common stock and increase transaction costs for sales and purchases of our common stock as compared to other securities.

We have arbitrarily determined, without regard to traditional valuation criteria, the price of the common stock we are offering. You may not rely on this price as an indication of the value of the securities you purchase.

The price of the common stock we are offering for sale in NuTech’s offering was arbitrarily determined in order for us to raise a total of $3,750,000. The offering price bears no relationship whatsoever to our assets, earnings, book value or other criteria of value. As of March 31, 2002 we had 10,248,550 shares outstanding and the book value of each share was $0.13. Among the factors considered by the Board of Directors in setting NuTech’s offering price were the proceeds to be raised in the offering and our cash requirements. The price of our common stock may decline after the offering.

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FORWARD LOOKING STATEMENTS

In addition to historical information, this prospectus contains certain “forward-looking statements”. These forward-looking statements are based on our current expectations, assumptions, estimates and projections about our business and our industry, and are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, competitive pressures, changes in technology that may render our products less desirable or obsolete, changes in the economy that would leave less disposable income to be allocated to entertainment, the loss of any member of our management team, the loss of certain key customers, the factors more fully discussed in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other factors, some of which will be outside our control. You are cautioned not to place undue reliance on these forward-looking statements, which relate only to events as of the date on which the statements are made.

USE OF PROCEEDS

If we sell all of the 2,500,000 shares of common stock we are offering, we will receive proceeds totaling $3,750,000. (We will not receive any proceeds from the sale of the common stock offered by the selling shareholders.) We expect to use the proceeds as follows:

• $2,434,060 (approximately 65% of the proceeds of NuTech’s offering) will be used to acquire licenses for entertainment products, particularly Japanese anime, and to produce popular music concerts;

• $1,128,440 (approximately 30% of the proceeds of NuTech’s offering) will be used to retire debt, including our bank line of credit; and

• $187,500 (approximately 5% of the proceeds of NuTech’s offering) will be used as working capital and for our general corporate purposes.

The debt we intend to retire includes the following:

• our bank line of credit in the amount of $650,000, which accrues interest at the rate of prime plus 1.75% and is due to be paid in full on April 30, 2003;

• a loan from Ritek Corporation in the amount of $400,000, which accrues interest at the rate of 8.5% and was due to be paid in full on June 10, 1999;

• a loan from Elynor Kasper in the amount of $60,000, which accrues interest at the rate of 10% and is due to be paid in full on demand;

• a loan from Brandon Kasper in the amount of $7,418, which accrues interest at the rate of 7% and is due to be paid on demand;

• a loan from Ryan Kasper in the amount of $7,467, which accrues interest at the rate of 7% and is due to be paid on demand;

• a loan from Jordan Kasper in the amount of $3,555, which accrues interest at the rate of 7% and is due to be paid on demand.

Proceeds of the above-referenced loans were used to acquire licenses for entertainment products and for working capital purposes. Elynor Kasper is the mother of our President and Chief Executive Officer, Mr. Lee Kasper. Brandon Kasper, Ryan Kasper and Jordan Kasper are Mr. Kasper’s children.

Other than as set forth in this prospectus, we currently have no commitments or agreements and are not involved in any negotiations with respect to any acquisitions or investments. The allocation of the net proceeds of NuTech’s offering discussed above represents management’s current estimates only. We cannot specify with

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certainty the particular uses for the net proceeds to be received upon completion of NuTech’s offering, as the actual allocation will depend upon the licensing or other business opportunities that arise, the amount of our future revenues, any change or inaccuracy in our assumptions about our business or future operations and the other factors described in the section of this prospectus entitled “Risk Factors”. Accordingly, management will have broad discretion in using the net proceeds of NuTech’s offering. Pending such uses, we intend to invest the net proceeds of NuTech’s offering in a money market account.

Working capital and general corporate purposes assumes expenditures for our operations, such as hiring additional personnel and acquiring and enhancing our operating, support and management systems.

If we are unable to raise the entire $3,750,000, we anticipate that we will allocate any money we receive to the categories set forth above, although the percentage allocated will be determined by our needs at the time the funds are received.

DETERMINATION OF OFFERING PRICE

There is no established public market for the shares of common stock that we are registering. Our management has established a price of $1.50 per share based upon management’s estimate of our cash requirements and the price at which potential investors might be willing to purchase the common stock we are offering. The offering price has been arbitrarily determined and does not bear any relationship to our assets, results of operations, or book value, or to any other generally accepted criteria of valuation.

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DILUTION

We are registering for sale to new investors up to 2,500,000 shares of common stock.

On June 18, 1997 our founding shareholder, Mr. Lee Kasper, paid $1.00 per share for 1,000 shares of our common stock and on July 31, 2000 our Board of Directors issued to Mr. Joseph Giarmo, our Vice-President and a director, 50 shares of our common stock as compensation for extraordinary services rendered to us by Mr. Giarmo. The Board of Directors determined that the services had a value of $250.

On May 4, 2001 our Articles of Incorporation were amended to increase the authorized number of shares of our common stock from 2,000,000 to 100,000,000 and to split each share of outstanding common stock from one share into 7,905 shares. After giving effect to the stock split, Mr. Kasper owned 7,905,000 shares of common stock, bringing down the cost of each share of common stock to approximately $ .000127 per share. After giving effect to the stock split, Mr. Giarmo owned 395,250 shares of common stock, bringing down the cost of each share of common stock to approximately $ .000633 per share.

Other of our existing shareholders whose shares are being registered for resale received our common stock in exchange for the surrender of certain contract rights, having a value of $3,000, or for services rendered to us, having a value of $10,500 and $12,000, respectively. The Board of Directors agreed to issue 100,000 shares, 350,000 shares and 400,000 shares, respectively, to these shareholders in exchange for these obligations.

On September 13, 2001 the Board of Directors agreed to convert $100,000 of debt owed to Sarah and LeBron Barkstelle to common stock at the rate of one share of common stock for each $1.00 converted.

Those shareholders who purchased shares in our private offering dated June 1, 2001 paid $1.50 per share for their shares of common stock. Shareholders who purchased shares in our private offering also received a warrant to purchase an identical amount of shares of our common stock at a price of $3.00 per share. The warrants will expire on November 1, 2002. The exercise of the warrants at a time when the exercise price is greater than our net tangible book value per share will result in an immediate increase in the net tangible book value of our existing shareholders. At the same time, new investors will experience immediate dilution in the value of their investment. As of the date of this offering, none of the warrants has been exercised.

On April 15, 2002, we granted options to purchase a total of 1,705,000 shares of our common stock, in accordance with the NuTech Digital, Inc. 2001 Equity Incentive Plan, to many of our employees. Included in this grant was a grant to Mr. Kasper of an option to purchase 500,000 shares and a grant to Mr. Giarmo of an option to purchase 300,000 shares. The exercise price for all grants is $1.50 per share.

The following table sets forth on a pro forma basis at March 31, 2002 the differences between existing shareholders and new investors with respect to the number of shares of common stock purchased from us, the total consideration paid to us and the average price paid per share (assuming a proposed public offering price of $1.50 per share).

	Shares Purchased	% Total Shares Outstanding		Total Consideration			Approximate % of Total Consideration
New Investors	2,500,000	19.6	%	$	3,750,000		71.5	%
Existing Shareholders	10,248,550	80.4	%	$	1,497,450	(1)	28.5	%

(1) Aside from cash, we issued stock in exchange for services rendered, in cancellation of debt, and in exchange for the cancellation of contract rights. All of these have been included in this figure.

The difference between the public offering price per share of common stock and the net tangible book value per share of common stock after this offering constitutes the dilution to investors in this offering. Net tangible book value per share is determined by dividing the net tangible book value (total assets less total liabilities) by the number of outstanding shares of common stock. The dilution calculations we have set forth in this section reflect an offering price of $1.50 per share.

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As of March 31, 2002, we had a net tangible book value of $1,301,831 or $0.13 per share of issued and outstanding common stock. After giving effect to the sale of the common stock we are offering, the net tangible book value at that date would have been $4,790,261 or $0.40 per share. This represents an immediate increase in net tangible book value of $0.27 per share to existing shareholders and an immediate dilution of $1.10 per share to the investors in this offering.

The following table illustrates the per share dilution.

Offering price per share underlying common stock	$1.50
Net tangible book value per share as of March 31, 2002	$0.13
Pro-forma net tangible book value per share after this offering	$0.40
Pro-forma increase per share attributable to offered shares	$0.27
Pro-forma dilution to new investors	$1.10

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SELLING SHAREHOLDERS

The following table sets forth the names of the selling shareholders who may sell their shares using this prospectus. No selling shareholder has, or within the past three years has had, any position, office or other material relationship with us or any of our predecessors or affiliates, except for Lee Kasper, who is our President, Chief Executive Officer and a director, Joseph Giarmo, who is our Vice-President and a director, Pollet, Richardson & Patel, which serves as our legal counsel, Saratoga Capital Corporation, our distribution agent in Asia and Elynor Kasper, Mr. Lee Kasper’s mother, who relinquished the right to receive certain payments on the sale of designated children’s animated products in exchange for her stock.

The following table also sets forth certain information as of the date of this prospectus, to the best of our knowledge, regarding the ownership of our common stock by the selling shareholders. Because the selling shareholders can offer all, some or none of their shares of our common stock, we have no way of determining the number they will hold after this offering. Therefore, we have prepared the table below on the assumption that they will sell all shares covered by this prospectus.

Selling Shareholder	Shares held before the Offering	Shares being Offered	Shares held after the Offering	Percentage Owned after the Offering
Lee Kasper(1)	7,905,000	500,000	7,405,000	54.7	%
Joseph Giarmo(2)	395,250	200,000	195,250	1.4	%
Elynor Kasper(3)	100,000	100,000	0	0
Leora Kimble	350,000	350,000	0	0
Saratoga Capital Corporation(4)	400,000	400,000	0	0
Joseph Rubino(5)	33,332	33,332	0	0
Annamae Kaelber(5)	33,332	33,332	0	0
Jack Strauser and Jean Strauser(6)	133,332	133,332	0	0
William Perry and Lisa Perry(7)	66,666	66,666	0	0
Vern Hollingsworth(8)	13,332	13,332	0	0
Frank P. Parisi and Maria Parisi(5)	33,332	33,332	0	0
Charles Brett Howard(5)	33,332	33,332	0	0
Bernard Saul, Trustee of the Saul Family Trust(5)	33,332	33,332	0	0
Bailey B. Hutchins(8)	13,332	13,332	0	0
Ihab Abboushi(5)	33,332	33,332	0	0
Robert L. Anderson(5)	33,332	33,332	0	0
Robert J. Hillock and M. L. Hillock(5)	33,332	33,332	0	0
Wayne Lindholm(5)	33,332	33,332	0	0
Sterling Trust Company, Custodian f/b/o Paul William Lofholm(5)	33,332	33,332	0	0
Sarah Barkstelle and LeBron Barkstelle	100,000	100,000	0	0
Jeffrey I. Berger(5)	33,332	33,332	0	0
Fernando B. Motas(10)	66,664	66,664	0	0
Sterling Trust Company, Custodian f/b/o Loren McBride IRA(9)	13,600	13,600	0	0
Wallace S. Dash(8)	13,332	13,332	0	0
W. Steven Heise(10)	66,664	66,664	0	0
Richard B. Mead(8)	13,332	13,332	0	0
Adela P. Pena(11)	16,666	16,666	0	0
Joseph G. Birnbaum(12)	133,328	133,328	0	0
Sidney M. Crain(5)	33,332	33,332	0	0
RBC Dain Rauscher f/b/o Joseph E. Haefele IRA(5)	33,332	33,332	0	0
Victor Tsai and Katty Tsai(7)	66,666	66,666	0	0
Sterling Trust Company, Custodian f/b/o Paul Regnier(13)	20,000	20,000	0	0
Kennebec Resources, Inc.(5)	33,332	33,332	0	0
WCOA Schumann, P.C. Profit Sharing Plan(5)	33,332	33,332	0	0

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Selling Shareholder	Shares held before the Offering	Shares being Offered	Shares held after the Offering	Percentage Owned after the Offering
Sergio I. Trani, Jr. and Marylou C. Trani(13)	20,000	20,000	0	0
James Horalek(8)	13,332	13,332	0	0
Robert E. Dettle, Trustee of the Reboert E. and Rosalie T. Dettle Living Trust u/d/t/ 2-29-80(13)	20,000	20,000	0	0
Larry W. Simpson or Carol C. Simpson, Simpson Trust dated 6-22-01(5)	33,332	33,332	0	0
Pollet, Richardson & Patel, a law corporation(14)	53,333	53,333	0	0
Prechel Family Clinc, PC Profit Sharing Plan(13)	20,000	20,000	0	0
Humberto Corzo and Sylvia Rubio(8)	13,332	13,332	0	0
William N. McLintock, Trustee(14)	10,000	10,000	0	0
Urbach Kahn & Werlin Advisors, Inc.	53,333	53,333	0	0
Advanced Media Post, LLC	165,000	165,000	0	0
Peter Payne and Chiharu Yanai(5)	33,332	33,332	0	0
Camden Securities, Inc.	59,022	59,022	0	0
Scott M. Cooper	20,000	20,000	0	0
Richard A. Andolshek	2,000	2,000	0	0
Carlene F. Cooke	500	500	0	0
Hanover Capital Corp.	126,620	126,620	0	0
TOTAL	11,030,280	3,430,030

(1)   Lee Kasper is our President, Chief Executive Officer, Chief Financial Officer and a director.

(2)   Joesph Giarmo is our Vice-President and a director

(3)   Elynor Kasper is Lee Kasper’s mother.

(4)   Saratoga Capital Corporation is our distributor in Asia.

(5)   Includes shares issuable upon the exercise of warrants to purchase 16,666 shares of our common stock at a purchase price of $3.00 per share.

(6)   Includes shares issuable upon the exercise of warrants to purchase 66,666 shares of our common stock at a purchase price of $3.00 per share.

(7)   Includes shares issuable upon the exercise of warrants to purchase 33,333 shares of our common stock at a purchase price of $3.00 per share.

(8)   Includes shares issuable upon the exercise of warrants to purchase 6,666 shares of our common stock at a purchase price of $3.00 per share.

(9)   Includes shares issuable upon the exercise of warrants to purchase 6,800 shares of our common stock at a purchase price of $3.00 per share.

(10) Includes shares issuable upon the exercise of warrants to purchase 33,332 shares of our common stock at a purchase price of $3.00 per share.

(11) Includes shares issuable upon the exercise of warrants to purchase 8,333 shares of our common stock at a purchase price of $3.00 per share.

(12) Includes shares issuable upon the exercise of warrants to purchase 66,664 shares of our common stock at a purchase price of $3.00 per share.

(13) Includes shares issuable upon the exercise of warrants to purchase 10,000 shares of our common stock at a purchase price of $3.00 per share.

(14) Pollet, Richardson & Patel, a law corporation, is our legal counsel and has rendered an opinion to us regarding the validity of the shares being offered.

(15) Includes shares issuable upon the exercise of warrants to purchase 5,000 shares of our common stock at a purchase price of $3.00 per share.

We will pay all expenses to register the shares. The selling shareholders will pay any underwriting and brokerage discounts, fees and commissions and other expenses to the extent applicable to them.

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PLAN OF DISTRIBUTION

This is our initial public offering. We are registering a total of 5,930,030 shares of our common stock. Of this amount, 2,500,000 shares, referred to in this prospectus as “NuTech’s offering”, are being offered by NuTech and 3,430,030 shares are being offered by the selling shareholders. We will receive the proceeds from the shares offered in NuTech’s offering. We will not receive the proceeds from the sale of the shares by the selling shareholders. However, of the shares offered by the selling shareholders, 703,444 shares are represented by warrants owned by some of the selling shareholders. We will receive proceeds from any selling shareholder who exercises a warrant to purchase our common stock.

We anticipate that a market maker will apply to have our common stock traded on the OTC Bulletin Board. Until our shares are quoted on the OTC Bulletin Board, we estimate that the selling shareholders will sell within a price range of $1.50 to $3.00 per share. If we are successful in having our shares traded on the OTC Bulletin Board, the selling shareholders will be able to sell their shares from time to time at prevailing market prices or privately negotiated prices.

Any of the selling shareholders, acting alone or in concert with one another, may be considered statutory underwriters under the Securities Act of 1933 if they are directly or indirectly conducting an illegal distribution of the securities on our behalf. For instance, an illegal distribution may occur if any of the selling shareholders provides us with cash proceeds from the sales of his or her securities. If any of the selling shareholders are determined to be underwriters, they may be liable for securities violations in connection with any material misrepresentation or omission made in this prospectus.

Broker-dealers may charge commissions to both selling shareholders selling common stock, and purchasers buying shares sold by a selling shareholder. Neither the selling shareholders nor NuTech can presently estimate the amount of such compensation. We know of no existing arrangements between the selling shareholders and any other shareholder, broker, dealer, underwriter or agent relating to the sale or distribution of the shares.

We have agreed to bear the expenses of the registration of the shares, including legal and accounting fees. Offers or sales of the shares have not been registered or qualified under the laws of any country other than the United States. To comply with certain states’ securities laws, if applicable, the shares will be offered or sold in such jurisdictions only through registered or licensed brokers or dealers. There can be no assurance that the selling shareholders will sell any or all of the shares offered by them in this offering.

The shares to be sold in NuTech’s offering will be offered by our President, Chief Executive Officer and director, Mr. Lee Kasper, on a best efforts basis with no minimum. In the event, however, that we elect to sell these securities through an underwriter or broker-dealer, we may pay a cash fee of up to 10% of the proceeds we receive, resulting in net proceeds to us of $1.35 per share or $3,375,000 if NuTech’s offering is fully sold.

In accordance with Regulation M promulgated under the Securities Exchange Act of 1934, neither NuTech nor the selling shareholders may bid for, purchase or attempt to induce any person to bid for or purchase any of our common stock while we or they are selling stock in this offering. Neither we nor any of the selling shareholders intends to engage in any passive market making or undertake any stabilizing activity for our common stock. To our knowledge, none of the selling shareholders intends to engage in any short selling of our common stock.

LEGAL PROCEEDINGS

We are not a party to any material legal proceeding, nor to the knowledge of management, are any legal proceedings threatened against us. From time to time, we may be involved in litigation relating to claims arising out of operations in the normal course of business.

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DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The name, age and a description of the positions held by our directors, executive officers and key employees are as follows:

Name	Age	Position(s)
Lee Kasper	56	President, Chief Executive Officer, Chief Financial Officer and director
Joseph Giarmo	34	Vice President and director
Javier Corzo	37	Software Systems Programmer
Yegia Eli Aramyan	49	Accountant and director

There are no family relationships between any directors and executive officers.

None of our directors or executive officers has, during the past five years,

• had any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time,

• been convicted in a criminal proceeding and none of our directors or executive officers is subject to a pending criminal proceeding,

• been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, futures, commodities or banking activities, or

• been found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

Lee Kasper.    President, Chief Executive Officer, Chief Financial Officer, founder and director.    Mr. Kasper began his career in the entertainment industry in 1982 by co-founding Image Entertainment, a publicly traded company. Image Entertainment distributes video programming on laserdisc and DVD. During his years with Image Entertainment, Mr. Kasper was a director as well as the Executive Vice President. He was responsible for business development as well as for licensing, manufacturing, and product fulfillment. His major accomplishments while he was at Image Entertainment included building a team of international manufacturers, acting as primary negotiator of licensing agreements with over one hundred studios, developing sales relationships with major retailers and raising over $6,000,000 from Mitsubishi and Mitsui. When Mr. Kasper left Image Entertainment in 1993, its annual sales had grown to $60,000,000. Mr. Kasper left Image Entertainment to found NuTech Entertainment, Inc., a producer of karaoke music software, which is now a division of NuTech. In 1997 Mr. Kasper formed NuTech for the purpose of licensing, manufacturing and distributing DVD products worldwide. In 2001, our gross revenues from all operations, including sales of films, games and karaoke software and providing authoring services, totaled $5,021,232. Mr. Kasper has been a director since our inception.

Joseph Giarmo.    Vice-President and director.    Mr. Giarmo joined us as Vice President on December 1, 1998. Since that time, he has developed numerous DVD product lines, award nominated productions and e-commerce Web sites. Mr. Giarmo is in charge of production of our products, and has been personally responsible for the production of our anime products. We received the AVN 2002 Award for best DVD menus primarily as a result of Mr. Giarmo’s efforts. Prior to joining NuTech, Mr. Giarmo was employed by Metro Global Media, Inc. (“Metro”). Mr. Giarmo joined Metro in September 1995 as a CD-Rom Specialist, creating interactive games and developing products based on Mac/PC formats. In 1996 Mr. Giarmo was promoted to Managing Director after launching and marketing various award winning product lines. In 1997 Mr. Giarmo was

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promoted to Vice President, Product Development. During his last year with Metro, Mr. Giarmo created the first true perspective multi-angle DVD. From 1988 until he joined Metro, Mr. Giarmo was employed by the company he founded, Compu-Doc, a computer service company that provided services primarily to military and educational facilities. Working closely with state educational facilities, Mr. Giarmo became a licensed authorized service center for IBM, HP, Digital and Zenith data systems, among others. After becoming one of the largest service centers for Zenith data systems, and earning Factory Service Status, Compu-Doc eventually became the sole provider of all service for the tri-state military installations. Compu-Doc opened a retail division in 1992, the focus of which was custom-built, high performance computer systems. Mr. Giarmo has been a director of NuTech since May 2001.

Yegia Eli Aramyan.    Accountant and director.    Mr. Aramyan joined NuTech in 2001 as an accountant, responsible for maintaining our general ledger, preparing financial statements, undertaking internal auditing and working with our independent auditors on our financial statement preparation. Prior to joining NuTech, Mr. Aramyan worked for 20 years as Group Controller and Accounting Manager for various companies in an investment group, including Morfi International and Sobleski USA. His responsibilities included budgeting, control, tax, audit, consolidations and general ledger and supporting work. On a consulting basis, Mr. Aramyan has worked for a number of high technology firms, performing accounting and implementing information systems. Mr. Aramyan earned his Bachelor of Arts and Masters of Arts degrees in Economics and Finance from the University of Armenia. Mr. Aramyan became a director in June 2002.

Javier Corzo.    Software Systems Programmer.    Prior to joining NuTech in April 2001, Mr. Corzo spent two years as a programmer, systems administrator, and primary troubleshooter at BuroWARE USA. While there, Mr. Corzo designed, developed, implemented and integrated operation and accounting software. Mr. Corzo also supervised, trained and aided other technicians. Mr. Corzo was crucial in modifying and enhancing the BuroWARE software for the United States market. Prior to his employment with BuroWARE USA, Mr. Corzo rendered consulting services to businesses, designing, building and installing network and individual systems using accounting applications. Mr. Corzo will be responsible for automating and interfacing our Internet site with sales and delivery of our products. Mr. Corzo obtained a Bachelor of Science degree in Applied Mathematics from UCLA in 1987.

Our directors are elected at each annual meeting of the shareholders, and their term of office runs until the next annual meeting of the shareholders and until their successors have been elected.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of the date of this prospectus, information regarding the beneficial ownership of our common stock before the offering with respect to each of our executive officers; each of our directors; each person known by us to own beneficially more than 5% of the common stock; and all of our directors and executive officers as a group. The term “executive officer” is defined as the Chief Executive Officer/President, Chief Financial Officer and the Vice-President. Each individual or entity named has sole investment and voting power with respect to shares of common stock indicated as beneficially owned by them, subject to community property laws, where applicable, except where otherwise noted.

Title of Class of Security	Name and Address(1)	Number of Shares of Common Stock Beneficially Owned(2)	Percentage of Common Stock Before Offering(7)
Common Stock	Lee Kasper(3)(4)(5)(6)	8,405,000	75.8	%
Common Stock	Joseph Giarmo(3)(4)	692,250	6.2	%
Common Stock	Yegia Eli Aramyan	23,334	*
	All Officers, Directors and 5% Shareholders	9,120,584	82.0	%

* Less than 1%.

(1) Unless otherwise indicated, the address of the persons named in this column is c/o NuTech Digital, Inc., 7900 Gloria Avenue, Van Nuys, California 91406.

(2) Included in this calculation are shares deemed beneficially owned by virtue of the individual’s right to acquire them within 60 days of the date of this prospectus that would be required to be reported pursuant to Rule 13d-3 of the Securities Exchange Act of 1934.

(3) Executive Officer.

(4) Director.

(5) 5% Shareholder.

(6) Includes shares of our common stock owned by Michele Kasper as her community property.

(7) Includes shares of stock underlying the warrants issued in the private placement we undertook on June 1, 2001. As of the date of this prospectus, none of the warrants have been exercised.

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DESCRIPTION OF SECURITIES TO BE REGISTERED

Common Stock

The securities being offering in NuTech’s offering and by the selling shareholders are shares of our common stock. We are authorized by our Articles of Incorporation to issue one class of capital stock, namely 100,000,000 shares of common stock, without par value. Prior to this offering there has been no public or private trading market for our common stock.

We presently have issued and outstanding 10,380,169 shares of common stock. Holders of the common stock are entitled to one vote per share on all matters subject to shareholder vote. If the Board of Directors were to declare a dividend out of funds legally available therefore, all of the outstanding shares of common stock would be entitled to receive such dividend ratably. Except for dividends declared to Mr. Lee Kasper, our Chief Executive Officer, we have never declared dividends and we do not intend to declare dividends in the foreseeable future. If NuTech was liquidated or dissolved, holders of shares of common stock would be entitled to share ratably in assets remaining after satisfaction of our liabilities.

Most of our shareholders have signed “Shareholder Buy/Sell” or other purchase agreements that grant a right of first refusal to NuTech and to Mr. Lee Kasper to purchase the shareholder’s common stock upon the occurrence of certain events, such as the shareholder’s desire to transfer his common stock to a third party or upon the shareholder’s death. Most of the shareholders have also granted to NuTech “drag-along” rights in the event that certain kinds of corporate transactions are approved by a majority of the shares entitled to vote. These drag-along rights require the shareholders who did not approve of the transaction to dispose of their common stock in the manner approved by the majority. Our Board of Directors has approved the termination, on the date that this registration statement becomes effective, of all Shareholder Buy/Sell agreements and of these provisions in any purchase agreement as to all shareholders who are bound by them.

Holders of common stock may elect directors using cumulative voting.

Warrants Issued Through Our Private Offering

On June 1, 2001 we began a private offering of units, valued at $25,000 each, consisting of 16,666 shares of common stock and a warrant to purchase a like number of shares of common stock at an exercise price of $3 per share. We sold a total of 703,444 shares of common stock and warrants to purchase an additional 703,444 shares of common stock. The warrants are immediately exercisable. The warrants will expire on November 1, 2002. The exercise price and the number of shares issuable upon exercise of the warrants will be adjusted upon the occurrence of certain events, including the issuance of common stock as a dividend on shares of common stock, subdivisions, reclassifications or combinations of the common stock or similar events. The warrants do not contain provisions protecting against dilution resulting from the sale of additional shares of common stock for less than the exercise price of the warrants or the current market price of our securities and do not entitle the warrant holders to any voting or other rights as a shareholder until the warrants are exercised and the common stock is issued.

At all times that the warrants are outstanding, we will authorize and reserve at least that number of shares of common stock equal to the number of shares of common stock issuable upon exercise of all outstanding warrants.

For the term of the warrants, the holders are given the opportunity to profit from an increase in the per share price of our common stock, with a resulting dilution in the interests of all other shareholders.

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INTERESTS OF NAMED EXPERTS AND COUNSEL

The law firm of Pollet, Richardson & Patel, A Law Corporation, owns 53,333 shares of our common stock. Pollet, Richardson & Patel will render an opinion regarding the validity of the securities offered in this offering. Pollet, Richardson & Patel is included as a selling shareholder in this prospectus.

DISCLOSURE OF COMMISSION POSITION ON

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Section 317 of the California General Corporation Law permits the indemnification of a corporation’s agents (which includes officers and directors) because he is a party (or he is threatened to be made a party) to any action or proceeding by reason of the fact that the person is or was an agent of the corporation or because he is a party (or he is threatened to be made a party) to any action or proceeding brought by or on behalf of a corporation. If the agent is successful on the merits in defense of any action or proceeding, the corporation must indemnify the agent against expenses actually and reasonably incurred by the agent in such defense.

Article V of our Articles of Incorporation provides that the liability of directors for monetary damages shall be eliminated to the fullest extent permissible under California law. This provision requires NuTech to indemnify its directors, as permitted by law, in excess of Section 317 of the California General Corporation Law.

Our bylaws permit us to indemnify our officers and directors, to the maximum extent permitted by the California General Corporation Law, against expenses, judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding arising by reason of the fact any person is or was an officer or director of NuTech. In this regard, we have the power to advance to any officer or director expenses incurred in defending any such proceeding to the maximum extent permitted by law.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of NuTech pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.

ORGANIZATION

In 1993 Mr. Lee Kasper founded NuTech Entertainment, Inc. to license and distribute karaoke software. Mr. Kasper was the sole shareholder of NuTech Entertainment, Inc. In 1997, Mr. Kasper began to license and distribute films and, for that purpose, incorporated NuTech Digital, Inc. NuTech Digital, Inc. began selling films in May 1997. In 1999, in order to reduce expenses, Mr. Kasper combined the business of NuTech Entertainment, Inc. with the business of NuTech Digital, Inc. To accomplish this, the assets of NuTech Entertainment, Inc. were distributed to Mr. Kasper, its sole shareholder, who subsequently transferred the assets into NuTech Digital, Inc. NuTech Entertainment, Inc. ceased doing business in 1999 and was dissolved in 2001.

NuTech Digital, Inc. is now engaged in licensing and distributing general entertainment products for children and adults. Our products include children’s animated films and video games, karaoke software, Japanese anime and late night programming. We distribute our products throughout the world via retail stores, the Internet, and wholesale distributors. We also facilitate authoring services to content providers in the entertainment industry. Our products are replicated for us by third parties.

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DESCRIPTION OF BUSINESS

Our Products

Our film products are sold in two formats, digital versatile disc, commonly known as DVD, and VHS tapes. Our karaoke products are also sold in two formats, DVD and CD + G. In 2001, sales of our DVD film products totaled 344,550 units, which accounted for approximately 42.69% of our sales, while sales of films on VHS tape totaled 11,666 units, which accounted for approximately 1.45% of our sales. Of these amounts, sales of Japanese anime, including hentai, represented approximately 50.73% of all DVDs sold and approximately 89.97% of all VHS tapes sold. In 2001, sales of our CD + G karaoke products totaled 447,907 units, which accounted for approximately 55.49% of our sales while sales of our DVD karaoke products totaled 2,997 units, which accounted for approximately 0.37% of our sales.

Japanese Animated Films

The animated film art form known as “anime” had its start in Japan around 1963, the product of animators Osamu Tezuka and Mitsuteru Yokoyama. Anime has a distinctive look, including highly stylized and realistic background images, which “play-off” the often whimsically drawn characters. Since the early 1990s, anime has begun to find an audience in the United States. Even though these films are animated, they generally have broad audience appeal due to their complex story lines and their tendency to be emotionally charged. Anime encompasses many genres, including action/adventure films targeted to young girls (“shojo”) and young boys (“shonen”), horror, fantasy and science fiction films, comedy, and films produced solely for adults (“hentai”).

We believe that anime has a strong and growing fan base, both in Asia and the United States. For the first time in history, the Academy Awards included an Oscar^™ for best animated feature film. Due to their quality and variety of subject matter, many expected anime features from Japan to be nominated along with those features produced by Disney and Dreamworks. The Cartoon Network announced that it plans to include three new anime series on its network, and in October 2001 the three-day Big Apple Anime Fest, touted as the “Cannes Film Festival of the Anime Manga Culture” was scheduled to be held in New York City. In October 2000, anime represented approximately 3.52% of all titles available in the United States. By April 2001, that percentage had grown to 4.42%.

We believe that anime, and particularly hentai, will continue to grow in popularity, and that this is evidenced by the increase in the number of anime titles now available for purchase or rental. We have invested in licensing rights to 75 anime titles, including erotic feature films, action/adventure films and horror films.

Anime comes to us as an original completed master and artwork with Japanese dialogue tracks. We hire voice-over actors to dub the dialogue in English, and create a finished master for DVD and VHS formats.

Revenues from sales of anime, including hentai, totaled approximately $1,312,868 in 2000 and $2,456,146 in 2001, which represented approximately 30% and 50% of our total sales, respectively. During the 2000 fiscal year, we licensed only 13 hentai titles, but these titles accounted for $1.1 million in sales, or 26% of all revenues earned that year. During the 2001 fiscal year, we licensed 75 hentai titles, which accounted for over $2 million in sales, or over 42% of all revenues earned that year. For this reason we have continued to license hentai anime products, so that we currently have 64 hentai titles, and we intend to use the proceeds of this offering to acquire the rights to an additional 100 hentai animated titles.

Children’s Animated Films and Games

We acquired 27 classic children’s animation titles and produced these in DVD format, including Alice In Wonderland, BlackBeauty, Tom Sawyer and 20,000 Leagues Under the Sea.

We are also a DVD distributor of “Shadoan”, a role-playing game set in a magical kingdom populated by princes, princesses, wizards and dragons. We believe that sales of this game may grow as more DVD players, including the Sony PlayStation 2 platforms, are purchased for family entertainment.

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Our children’s products accounted for approximately $392,600 in sales during 2001, which represented approximately 8% of our revenues for that year.

Karaoke

The word “karaoke” is derived from the Japanese words “kara” meaning empty and “oke” which is the translation of the American word “orchestra”. Karaoke is a pre-recorded song in which the lead vocals have been eliminated or re-mixed out, and the voice of the individual performing is substituted on the sound track. The back-up singers and musicians are left in the song for accompaniment.

The goal of karaoke is to make each singer feel like a star and sound like a professional vocalist. This is achieved through a DVD or CD + G player and an on-stage television monitor that prompts the singer with the lyrics and rhythm of the song being sung. If a song is recorded on CD + G (compact disc plus graphics), the lyrics are displayed on a colored background. If a song is recorded on DVD, the lyrics are displayed over moving images.

The popularity of karaoke has risen steadily in the United States since its introduction here in or around 1985. The Singing Machine Company, the largest manufacturer of karaoke hardware, has seen sales increase from $4,000,000 in 1997 to $16,000,000 in 2000. The entire market for karaoke hardware in the United States is approximately $35,000,000, an increase of almost 650% from the market in 1997, which was $5,500,000.

The market for karaoke hardware and software is estimated to be $10 billion in the Far East, but less than $300 million in North America. We believe that there is great potential for expansion in this market, which has grown steadily in the United States. We believe that this growth trend will continue.

We receive the original completed karaoke masters and artwork ready for replication.

We license and distribute 256 volumes of karaoke software in DVD and CD+G formats for use with karaoke recording equipment. One track of those tapes offers complete music and vocals for practice and the other track is instrumental only for performance by the participant. Most of the audiocassette music sold by us is accompanied by printed lyrics. Our CD + G and DVD products include lyrics that appear on a video or television screen. We contract for the reproduction of audiocassette music, which is produced by us or by an independent producer.

During 2001, karaoke products accounted for over $1.5 million in sales, which made up approximately 31.76% of our total revenues.

Late Night and Animated Films

Consumer purchases of adult entertainment products have increased dramatically. In 1999, the total worldwide adult entertainment market was estimated to be $56 billion. The industry that has come to be known broadly as late night entertainment began its transformation about 30 years ago, with the advent of home videos and the VCR. We believe that DVD has had a dramatic impact on late night programming, due to its high video clarity and menu driven features.

During the 1980s, the availability of late night movies on videocassette and on cable television helped to legitimize the consumption of explicit material by putting it in the home setting. The result has been the legitimization of industry products by other businesses not traditionally associated with the late night entertainment industry. Video stores, long distance telephone carriers, satellite providers, and cable companies earn significant returns by supplying or investing in adult entertainment businesses, either directly or indirectly.

We receive the original completed master and artwork of a film. We send the master to a replicator to produce a tape which is then used to manufacture the work in DVD and VHS formats.

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We license over 260 late night films, which are distributed through the Internet as well as through retailers and wholesale outlets. Fans of anime enjoy our collection of “hentai”, a combination of late night programming with animated characters.

Revenues from late night programming (not including hentai) totaled approximately $1,414,666 in 2000 and $887,715 in 2001, which represented approximately 33% and 18% of our total sales, respectively.

General Production Services

When businesses offering DVD products obtain a license to duplicate a film or other work of art, they receive the work as an analog or digital tape. In order to replicate the film on DVD, the licensee must create a digital linear tape. This process is known as “authoring”. After the digital linear tape is created, it is shipped to a factory where it is replicated onto a “stamper”. The stamper is used to make the DVDs. We facilitate DVD authoring and menu designs to complete product replication and packaging for other content providers in the entertainment industry.

Planned Music Concert Production

It is our goal to film live music concerts by current, well-known musical artists, which we will sell in DVD format. To date, we have not had sufficient funds to do this and have taken no action to implement this plan. When we have adequate funds to begin filming live music concerts, we anticipate that our initial efforts will take place in southern California.

Our Suppliers and Customers

We replicate our films, music and games on DVD through three suppliers, U-Tech Media, Media Factory and L & M. If all of our replicating suppliers were to become unable to provide the volume of replication services necessary for our business, we believe that we could find other suppliers who would be able to provide these services to us at competitive prices.

During the 2001 fiscal year, sales made to a single distributor of karaoke software represented approximately 10.4% of all revenues earned from sales for that year and 23% of all revenues earned from sales for the previous year. If we were to lose this distributor, we believe that we would be able to find other distributors to sell our karaoke products, or that we would be successful in marketing these products directly.

Generally, we sell all of our non-karaoke DVD and VHS products through more than 300 retail outlets, the Internet, and wholesale distributors.

The Effect of Government Regulation on our Business

While production of our products does not require government approval, the sale of our late night programming is subject to regulation by the federal government, as well as by various state and municipal governments. Several states and communities in which our products are distributed have enacted laws regulating the distribution of late night programming with some offenses designated as misdemeanors and others as felonies, depending on numerous factors. The consequences for violating the state statutes are varied. There is also a federal prohibition with respect to the dissemination of late night programming, and the potential penalties for individuals (including corporate directors and officers) violating these federal laws include fines, community service, probation, forfeiture of assets and incarceration. We attempt to comply with all applicable statutes and regulations.

Our common stock is expected to trade on the over-the-counter electronic bulletin board and, therefore, is subject to the requirements of certain rules promulgated under the Securities Exchange Act of 1934, which require additional disclosure by broker-dealers in connection with any trades involving a stock defined as a “penny stock”. A penny stock is generally defined as any non-Nasdaq equity security that has a market price of less than $5.00 per share, subject to certain exceptions.

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The penny stock rules require the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith and impose various sales requirements on broker-dealers who sell penny stocks to persons other than established customers and “accredited investors”. An accredited investor is generally defined as an investor with a net worth in excess of $1,000,000, or annual income exceeding $200,000 individually or $300,000 together with a spouse.

Pursuant to Rule 15g-9 of the Securities Exchange Act of 1934, for these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to the sale. The broker-dealer also must disclose the commissions payable to the broker-dealer, current bid and offer quotation for the penny stock and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. This information must be provided to the customer orally or in writing before or with the written confirmation of trade sent to the customer. Monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. The additional burdens imposed upon broker-dealers by such requirements could, in the event the common stock were deemed to be a penny stock, discourage broker-dealers from effecting transactions in our common stock which could severely limit the market liquidity of the common stock.

Licenses and Other Intellectual Property

We do not have patents, franchises or concessions and we have not entered into labor contracts. However, all of our games, and many of our film and music titles, are licensed from third parties. License periods are generally no shorter than five years and no more than 10 years. Most of the license agreements require us to pay an advance royalty, which we recoup through sales. Some of the license agreements require us to pay royalties during the term of the license. The computation of royalties varies, depending on our determination of the importance of the title to our product offerings. Royalties are primarily computed as a percentage of gross sales and may include guaranteed payments of royalties. We also purchase the rights to certain of our film and music titles for a one-time fee, rather than for the payment of on-going royalties.

While we have not registered our trade names or our logo with the United States Patent and Trademark Office, we believe that the name recognition and image that we have developed in each of our markets significantly enhance customer response to our sales promotions. Accordingly, our trademarks are important to our business and we intend to aggressively defend them.

Competition

Nearly all of our products compete with other products and services that utilize free time or disposable income. The businesses in which we compete are, in general, highly competitive and service-oriented. We do not have long-term or exclusive service agreements with our suppliers or our customers. Business generation is based primarily on customer satisfaction with reliability, timeliness, quality and price, which has allowed us to establish long-term relationships with many of our customers.

Although our films are well established and high quality products in the general entertainment industry, we compete with entities selling similar products at retail as well as through wholesale distributors and the Internet. However, we believe that our entry into the anime market is ahead of our competitors, and provides us with a unique product that has the potential of significant growth.

Employees

We have 15 full-time employees including two in administration, two in sales, five in distribution, two in accounting, two in production, one in management information systems and one in customer service.

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DESCRIPTION OF PROPERTY

Our offices, operations and warehouse facilities are located at 7900 Gloria Avenue, Van Nuys, California 91406. We lease this facility at market rates. Our facility is approximately 9,500 square feet in size. Our lease term began on May 1, 2001 and will continue until July 31, 2006. We have one option to renew the lease, at the end of the least term, for an additional period of five years. The facility is adequate for our current operations, and management believes that it will continue to be adequate through the initial lease term.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We believe that consumers are using, and will continue to use, their discretionary income to build their film libraries, as they do with music and books. In the year 2000, consumers spent $7.38 billion for VHS tapes and $3.41 billion for DVDs. We also believe that the audience for anime will continue to grow worldwide, and that our investment in anime is well-timed. We are not aware of any trends, events or uncertainties that have, or are reasonably likely to have, a material impact on our short-term or long-term liquidity.

With the exception of the licenses we will acquire, we have not made any material commitments for capital expenditures in the immediate future.

Other than our belief that DVD products and anime will continue to grow in popularity worldwide, we do not know of any trends, events or uncertainties that have had or that are reasonably expected to have a material impact on our net sales or revenues or on income from our continuing operations.

We cannot generate enough cash solely through our operations to significantly expand our library of anime or to implement our plan to produce musical concerts.

Results of Operations

Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001

Our revenues from operations for the first three months of 2002 were $1,111,471, as compared to revenues of $962,039 for the first three months of 2001, approximately a 13.44% increase. The increase in revenues was due primarily to the overall growth of the DVD market and to the increase in the number of Japanese anime products we added to our film library.

Our gross profit from operations for the first three months of 2002 increased to $803,339 as compared to $689,654 for the first three months of 2001. Our gross margin stayed stable for the first three months of 2002, at approximately 73%, as compared to 72% for the first three months of 2001. Costs of sales increased during the first three months of 2002, to $308,132, as compared to $272,385 for the first three months of 2001. This increase in costs of sales was due to the increase in sales made during the quarter.

Selling, general and administrative costs increased by $303,020, to $883,271 for the first three months of 2002, as compared to $580,251, for the first three months of 2001, approximately a 34.4% increase. This increase is primarily attributable to expenses associated with the growth of our business, which included $19,942 for computer consulting work, $13,991 for employee insurance, $26,426 for rent in our new location, $97,394 in royalties and $289,173 in payroll and payroll taxes. We also spent $68,872 to attend a tradeshow.

Interest expense increased by $15,260 in the first three months of 2002, to $57,426, as compared to $50,914 in the first three months of 2001. This increase was primarily due to the fact that we borrowed more on our lines of credit to finance our increased sales.

We recorded a net loss of $88,680 from operations in the first three months of 2002, as compared to net income from operations of $58,489 in the first three months of 2001. The decrease in net income is primarily attributable to the selling, general and administrative costs associated with the growth of our business.

For the three months ended March 31, 2002 and for part of the year ended December 31, 2001 we were taxed as a C corporation. A C corporation pays taxes on the income it earns. For the three months ended March 31, 2001 and the year ended December 31, 2000, we were taxed as an S corporation. An S corporation does not pay tax on its income—instead, the tax is paid by the corporation’s shareholders. As a result of our net loss, we had a tax benefit of $57,426 for the three months ended March 31, 2002. Because we were an S corporation during the three months ended March 31, 2001, we owed no income tax.

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Set forth below is a comparison of our income tax expense (benefit) and net income (loss) on a pro-forma basis, as if we were a C corporation on March 31, 2001:

	March 31, 2002			March 31, 2001
Income (loss) before corporation income taxes	$	(146,106	)	$	58,489
Corporation income taxes (benefit)		(57,426	)		13,132
Pro-forma net income (loss)	$	(88,680	)	$	45,357

2001 Fiscal Year Compared to 2000 Fiscal Year

Our revenues from operations for the year ended December 31, 2001 were $5,021,232, as compared to revenues of $4,186,673 for the year ended December 31, 2000, a 20% increase. The increase in revenues was due primarily to the overall growth of the DVD market and to the increase in the number of Japanese anime products we added to our film library.

Our gross profit from operations for fiscal year 2001 increased to $3,886,370 as compared to $3,251,363 in fiscal year 2000. Our gross margin stayed stable in 2001, decreasing slightly to 77.3% in fiscal year 2001 from 77.6% in fiscal year 2000.

Selling, general and administrative costs increased by $1,242,467, to $3,430,563 for the year ended December 31, 2001 as compared to $2,188,096, for the prior fiscal year, a 57% increase. This increase is primarily attributable to expenses associated with the growth of our business, including royalty payments in the amount of $626,577, salaries and wages in the amount of $773,163 and interest expense in the amount of $253,718.

Other income and expenses, including depreciation and amortization expenses, increased by $138,119 in the 2001 fiscal year, to $539,099, as compared to $400,980 in the 2000 fiscal year. This increase was primarily due to the fact that we purchased a number of new licenses, which were subsequently released and depreciated.

We recorded net income of $167,181 from operations in the 2001 fiscal year as compared to net income from operations of $860,179 in the 2000 fiscal year. The decrease in net income is primarily attributable to an increase in legal and accounting fees which totaled $261,448, our change of status from an S corporation to a C corporation for tax reporting purposes resulting in corporation income taxes of $34,909 and in the payment of a salary, rather than a dividend, in the amount of $180,0000 to our Chief Executive Officer and President, and depreciation costs of $539,099 associated with new licenses.

For the period from January 1, 2001 to May 31, 2001 we were taxed as an S corporation. For the period from June 1, 2001 through December 31, 2001 we were taxed as a C corporation. A C corporation pays taxes on the income it earns. An S corporation does not pay tax on its income—instead, the tax is paid by the corporation’s shareholders.

Set forth below is a comparison of our income tax expense and net income on a pro-forma basis, as if we were a C corporation on December 31, 2001:

	Year Ended
	December 31, 2002		December 31, 2001
Income before corporation income taxes	$	202,090	$	860,179
Corporation income taxes		73,000		266,600
Pro-forma net income	$	129,090	$	593,579

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2000 Fiscal Year Compared to 1999 Fiscal Year

Our revenues from operations for the year ended December 31, 2000 were $4,186,673, as compared to revenues of $3,223,157 for the year ended December 31, 1999, a 30% increase. The increase in revenues was due primarily to the overall growth of the DVD market and to the addition of Japanese anime products to our film library.

Our gross profit from operations for fiscal year 2000 was $3,251,363 as compared to $2,161,635 in fiscal year 1999. Our gross margin increased to 78% in fiscal year 2000 from 67% in fiscal year 1999. The increase in gross margin was due primarily to a reduction in our replication costs. We were able to reduce our replication costs because the number of films we replicated increased, thereby allowing us to negotiate better pricing.

Other income and expenses, including depreciation and amortization expenses, increased by $70,627 in the 2000 fiscal year, to $400,980, as compared to $330,353 in the 1999 fiscal year. This increase was primarily due to the fact that our licensing activity increased during the 2000 fiscal year.

We recorded net income of $860,179 from operations in the 2000 fiscal year as compared to a net income from operations of $39,133 in the 1999 fiscal year. The increase in net loss is primarily attributable to an increase in product sales and lower production costs.

Liquidity and Capital Resources

To date, we have financed our operations with cash from our operating activities, a bank line of credit, a loan from the Small Business Administration, various loans from individuals and a private offering of our common stock.

Our bank line of credit is in the amount of $650,000 and is due on April 30, 2003. Interest accrues at the rate of 1.75% over prime. We currently make monthly interest payments of approximately $3,600. Our agreement with the lender requires us to maintain certain debt to equity ratios and to maintain a tangible net worth of $1,000,000.

The principal amount of the loan we received through the Small Business Administration is $900,000. Interest is adjusted at least once per year. The interest rate is 2% above the prime rate. The loan has a 10-year term. We make monthly payments of principal and interest in the amount of $12,398.

The following tables illustrate information about our significant contractual obligations and commercial commitments for the next five years as of March 31 and December 31.

	Payment Due By Period As of March 31
	Total		2003		2004		2005		2006		2007 and after
Real estate lease	$	429,000	$	93,600	$	93,600	$	93,600	$	93,600	$	54,600
Long-term debt		1,399,086		652,593		70,105		78,217		87,268		510,903
	$	1,828,086	$	746,193	$	163,705	$	171,817	$	180,868	$	565,503

	Payment Due By Period As of December 31
	Total		2003		2004		2005		2006		2007 and after
Real estate lease	$	468,000	$	93,600	$	93,600	$	93,600	$	93,600	$	93,600
Long-term debt		1,713,246		942,913		68,211		76,105		84,912		541,105
	$	2,181,246	$	1,036,513	$	161,811	$	169,705	$	178,512	$	634,705

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We are currently in default on a loan made to us by Ritek Corporation. The loan was in the amount of $400,000 and bears simple interest at the rate of 8.5%. The loan is secured with our license to the children’s video game, “Shadoan”, which we acquired from Ritek Corporation. We make interest payments to Ritek Corporation on a monthly basis. Ritek Corporation has not given us notice of default, as it is required to do under our agreement, before it can seek its remedy against us. If Ritek Corporation were to give us notice of default and we failed to pay the principal amount within 10 days after we receive the notice, we would be required to return our license to the game to Ritek Corporation. We have received minimal revenues from sales of the game, therefore, if we were required to return our license to the game to Ritek Corporation, it would not have a significant impact on our revenues or the results of our operations.

We can maintain our operations for the next 12 months solely with our cash and cash equivalents. However, we cannot greatly expand our library of anime films, nor can we embark on our plan to record popular music concerts unless we receive additional funding.

Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001

At March 31, 2002, cash amounted to $34,449 as compared to $0 cash at March 31, 2001.

During the three month period ended March 31, 2002, net cash provided by operating activities was $202,802 as compared to net cash used in operating activities of $342,330 during the three month period ended March 31, 2001. For the three month period ended March 31, 2002, cash was provided by operating activities due to sales increases and increases in financing. For the three month period ended March 31, 2001, cash was used by operating activities due to reduction in accounts payable and increases in advance royalty payments.

Net cash used in investing activities was $201,969 for the three month period ended March 31, 2002 as compared to $211,073 for the three month period ended March 31, 2001. The 2002 amount reflects expenditures of $195,688 for the purchase of completed masters and $6,281 for computer equipment and other improvements.

Net cash used by financing activities during the three months ended March 31, 2002 was $49,362 as compared to cash provided by financing activities of $523,477 for the three months ended March 31, 2001. The 2002 amount includes repayments of notes payable and our bank line of credit of $77,996 and changes in loans payable to an officer of $4,116. The 2001 amount includes proceeds from a note payable of $397,276, proceeds from a bank line of credit of $150,964 and changes in loans payable to an officer of $15,000.

2001 Fiscal Year Compared to 2000 Fiscal Year

At December 31, 2001, cash amounted to $82,978. Our primary sources of cash in fiscal 2001 consisted of cash provided by financing activities including $878,093, net of expenses, from the sale of our securities in the private offering undertaken on June 1, 2001. This was the first sale of our securities that we undertook for the purpose of raising capital. We also used our securities to pay for indebtedness incurred for professional and business services.

The primary uses of cash for the fiscal year ended December 31, 2001 consisted of licensing costs, general operating costs and expansion of our facility. We believe that cash generated by our current operations will be sufficient to continue our business for the next 12 months, however cash generated by current operations will not provide the means to allow us to expand operations by licensing a significant number of new works of anime, which are costly to obtain, or to implement our plan to produce musical concerts for the DVD format.

During the 2001 fiscal year, net cash used by operating activities was $221,018 as compared to net cash provided by operating activities of $932,222 during the 2000 fiscal year. Cash was used for operating activities because we increased sales by $834,559 over the prior year. Cash was used by operating activities in order to finance the increase in our sales activities as we extended more credit for our accounts receivable, increased our inventories and entered into more royalty agreements.

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Net cash used by investing activities was $744,095 for the 2001 fiscal year as compared to $863,526 for the 2000 fiscal year. These amounts reflect expenditures of $467,561 for completed masters, $189,562 for computers, furniture and equipment and $86,972 for leasehold improvements.

Net cash provided by financing activities during the 2001 fiscal year was $1,018,165 as compared to net cash used by financing activities of $96,753 for the 2000 fiscal year. Financing activities in the 2001 fiscal year consisted primarily of proceeds in the amount of $878,093 derived from a private offering of our common stock and proceeds of approximately $496,836 from a bank line of credit. Net cash used in financing activities for the 2000 fiscal year included payment of a dividend in the amount of $222,389 to our shareholders, payment of promissory notes in the amount of $690,541 and changes in loans payable to an officer in the amount of $136,810.

The net increase in accounts receivable of $532,414 was primarily due to the fact that our sales in the fourth quarter amounted to $1.9 million. Because of our increased sales, accounts payable increased by $191,650, to $1,258,797.

2000 Fiscal Year Compared to 1999 Fiscal Year

At December 31, 2000, cash amounted to $29,976. Our primary sources of cash in the 2000 fiscal year consisted of $932,222 in cash provided by operating activities and net proceeds from a Small Business Administration loan made to us by Imperial Bank of $900,000.

The primary uses of cash for the year ended December 31, 2000 consisted of repayment of debt totaling $827,351 and a dividend to our shareholders of $222,389.

During the 2000 fiscal year, due to increased sales and overall profits, net cash provided by operating activities was $932,222 as compared to net cash provided by operating activities of $186,109 during the 1999 fiscal year.

Net cash used by investing activities was $863,526 for the 2000 fiscal year as compared to $645,085 for the 1999 fiscal year. These amounts reflect the purchase of property and equipment.

Net cash used by financing activities during the 2000 fiscal year was $96,753 as compared to cash provided by financing activities of $445,219 for the 1999 fiscal year. The year 2000 amount includes payment of a dividend in the amount of $222,389 to our shareholders, payment of promissory notes in the amount of $690,541 and changes in loans payable to an officer in the amount of $136,810. The year 1999 amount includes an increase in a loan payable to a shareholder of $189,274 and an increase in our bank line of credit of $255,945.

The net decrease in accounts receivable of $226,167 was primarily due to an increase in the collection of accounts receivable. Accounts payable decreased by $86,087, to $1,067,147, due to repayments from increased earnings.

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CERTAIN TRANSACTIONS

In order to fund working capital requirements, we have from time to time borrowed money on an unsecured basis from persons who are executive officers, directors and/or beneficial holders of 5% or more of our common stock, or their affiliates. As of the date of this prospectus, our unpaid principal indebtedness to these persons is set forth below.

In March 2001, we entered into an arrangement with our Vice-President, Mr. Joseph Giarmo, whereby Mr. Giarmo advanced funds in the amount of $60,000 for the acquisition of licensing rights to certain films. Mr. Giarmo receives $0.25 for each VHS or DVD unit of the films that are sub-licensed by us. Our obligation under this agreement will terminate once we have paid to Mr. Giarmo a total of $120,000. To date, Mr. Giarmo has been paid $10,000 in accordance with this arrangement.

In May 2001, we obtained a loan from Brandon Kasper in the amount of $7,418, which accrues interest at the rate of 7% and is due to be paid on demand. Brandon Kasper is Mr. Lee Kasper’s son.

In May 2001, we obtained a loan from Ryan Kasper in the amount of $7,467, which accrues interest at the rate of 7% and is due to be paid on demand. Ryan Kasper is Mr. Lee Kasper’s son.

In May 2001, we obtained a loan from Jordan Kasper in the amount of $3,555, which accrues interest at the rate of 7% and is due to be paid on demand. Jordan Kasper is Mr. Lee Kasper’s son.

In October 2000, we received an unsecured loan in the amount of $100,000 from Mrs. Elynor Kasper, Mr. Lee Kasper’s mother. Simple interest accrues on this loan at the rate of 10% per year. The unpaid principal balance of this loan is $60,000. We are current on all interest payments.

Aside from the foregoing loans, we have also entered into the following transactions with our President and Chief Executive Officer, Mr. Lee Kasper, or with our Vice President and Secretary, Mr. Joseph Giarmo.

In July 2000, Mr. Kasper, provided both his personal residence and his personal guaranty as security for a loan in the amount of $900,000 which we borrowed through the Small Business Administration.

In March 2002, Mr. Kasper also agreed to personally guarantee our bank line of credit in the amount of $650,000.

In July 2000 we issued 50 pre-split shares of our common stock to Mr. Giarmo for extraordinary services he rendered to us during his employment. Concurrent with this stock issuance, we entered into a Corporate Control and Shareholder Buy/Sell Agreement with Mr. Giarmo. This agreement allows us or our President and Chief Executive Officer, Mr. Lee Kasper, the right to purchase Mr. Giarmo’s common stock upon the occurrence of certain events such as his death, the termination of his employment with us, or his voluntary or involuntary transfer of the common stock. This agreement will terminate upon the date that our registration statement on Form SB-2 is declared effective by the Securities and Exchange Commission.

MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Market Information

At this time there is no public trading market for our common stock.

We currently have a total of 10,380,169 shares of our common stock outstanding.

We also have outstanding warrants that were issued in conjunction with a private offering of our common stock undertaken on June 1, 2001. These warrants, if exercised, would permit shareholders to purchase an

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additional 703,444 shares of our common stock. These warrants may be exercised until November 1, 2002, at which time they will expire if not exercised. The price for each share of common stock purchased in accordance with the warrants is $3.00.

Upon completion of this offering, assuming all of the warrants are exercised and all of the shares are purchased, we will have outstanding 13,530,280 shares of common stock, of which 5,930,030 will be freely tradable, without restriction, except for restrictions imposed by certain state regulatory authorities. We issued the remaining 7,600,250 shares of outstanding common stock in private transactions in reliance upon exemptions from registration under the Securities Act. Those shares may be sold only if we file a registration statement or if there is an applicable exemption from registration. Rule 144 of the Securities Act of 1933 is not available for the resale of our common stock. Other than the common stock being registered for the selling shareholders in this offering, we have no agreement with any shareholder to register our securities.

In accordance with the NuTech Digital, Inc. 2001 Equity Incentive Plan we have also issued options to employees to purchase a total of 1,705,000 shares of our common stock. The options will expire 10 years from the date of grant, with the exception of options granted to our Chief Executive Officer and President, Mr. Lee Kasper, whose options will expire 5 years from the date of grant. The price for each share of common stock purchased pursuant to the options is $1.50.

Holders

We currently have 50 record holders of our common stock.

Dividends

We have not paid any cash dividends (with the exception of dividends paid to our founder and Chief Executive Officer and President, Mr. Lee Kasper, while NuTech was an S corporation for tax reporting purposes) and we currently intend to retain any future earnings to fund the development and growth of our business. Any future determination to pay dividends on our common stock will depend upon our results of operations, financial condition and capital requirements, applicable restrictions under any credit facilities or other contractual arrangements and such other factors deemed relevant by our Board of Directors.

Where You Can Find Further Information About Us

We filed with the Securities and Exchange Commission a registration statement on Form SB-2 under the Securities Act with respect to the shares being offered in this offering. This prospectus does not contain all of the information set forth in the registration statement, certain items of which are omitted in accordance with the rules and regulations of the Commission. The omitted information may be inspected and copied, at prescribed rates, at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the Commission. Statements contained in this prospectus as to the contents of any contract or other document filed as an exhibit to the registration statement are not necessarily complete, and in each instance where reference is made to the copy of the document filed as an exhibit to the registration statement, each such statement is qualified in all respects by such reference. For further information with respect to NuTech and the securities being offered in this offering, reference is hereby made to the registration statement, including the exhibits thereto and the financial statements, notes, and schedules filed as a part thereof.

31

EXECUTIVE COMPENSATION

The following table shows the compensation paid over the past three fiscal years with respect to our Chief Executive Officer, President and Chief Financial Officer and our Vice President. There are no additional individuals who would be included in this table but for the fact that the individual was not serving as an executive officer at the end of the last completed fiscal year:

SUMMARY COMPENSATION TABLE

							Long Term Compensation
		Annual Compensation					Awards		Payouts
Name and Principal Position	Year	Salary ($)			Bonus ($)	Other Annual Compen- sation ($)	Restricted Stock Awards ($)	Securities Underlying Options/ SARs(1)	LTIP Payout ($)	All Other Compen- sation ($)
Lee Kasper	2001	$	542,673	(1)	—	—	—	—	—	$	39,600	(2)
Director, CEO,	2000	$	222,389	(1)	—	—	—	—	—	$	15,048	(2)
President, CFO	1999		0		—	—	—	—	—	$	12,540	(2)
Joseph Giarmo	2001	$	131,553		—	—	—	—	—		—
Director, Vice President,	2000	$	135,872		—	—	—	—	—		—
Secretary	1999	$	91,229		—	—	—	—	—		—
Yegia Eli Aramyan	2001	$	45,000		—	—	—	—	—		—
Director, Accountant	2000	$	0		—	—	—	—	—		—
	1999	$	0		—	—	—	—	—		—

(1) Of the amount shown as compensation paid to Mr. Kasper in 2001, $362,673 was paid to him as a dividend and $180,000 was paid as salary. The amount shown as compensation paid to Mr. Kasper in 2000 was paid as a dividend.

(2) These amounts represent expenses paid in connection with Mr. Kasper’s automobile. 

We do not have a long term incentive plan or arrangement of compensation with any individual in the group of officers and directors.

Directors are not currently paid compensation for their services. Our bylaws permit us to compensate our directors, however, upon resolution of the Board of Directors.

Employment Agreements

We have no employment agreements with our named executive officers.

Equity Incentive Plan

Our Board of Directors and our shareholders have approved the NuTech Digital, Inc. 2001 Equity Incentive Plan which permits us to grant, for a ten year period, both stock purchase rights and stock options. We have currently reserved 3,500,000 shares of our common stock for issuance to our directors, employees and consultants under the Plan. In January of each year we are permitted to increase the number of shares of common stock reserved for awards to an amount that does not exceed 30% of all of our issued and outstanding shares. The Plan is administered by the Board of Directors, who will be referred to as the “Administrator”. The Administrator has the authority and discretion, subject to the provisions of the Plan, to select persons to whom stock purchase rights or options will be granted, to designate the number of shares to be covered by each option or stock purchase right, to specify the type of consideration to be paid, and to establish all other terms and conditions of each option or stock purchase right. Options granted under the Plan will not have a term that exceeds ten years from date of grant. As of the date of this prospectus, we have granted 1,705,000 awards under the Plan.

32

The following tables set forth certain information concerning the granting and exercise of incentive stock options during the last completed fiscal year by each of the named executive officers and the fiscal year-end value of unexercised options on an aggregated basis:

Option/SAR Grants for Last

Fiscal Year-Individual Grants(1)

Name	Number of Securities Underlying Options/SARs Granted (#)	% of Total Options/SARs Granted to Employees in Fiscal Year	Exercise Price ($/sh)	Expiration Date
Lee Kasper	-0-	-0-	-0-	-0-
Joseph Giarmo	-0-	-0-	-0-	-0-
Yegia Eli Aramyan	-0-	-0-	-0-	-0-

(1) Although no grants of options were made to Mr. Kasper, Mr. Giarmo or Mr. Aramyan during the 2001 fiscal year, in April 2002 the Board of Directors granted to Mr. Kasper an option to purchase 500,000 shares of our common stock at an exercise price of $1.50, to Mr. Giarmo an option to purchase 300,000 shares of our common stock, also at an exercise price of $1.50 and to Mr. Aramyan an option to purchase 70,000 shares of our common stock at an exercise price of $1.50. These grants were made through the NuTech Digital, Inc. 2001 Equity Incentive Plan.

Aggregated Option/SAR Exercises in Last Fiscal Year

And FY-End Option/SAR Values(1)

Name	Shares Acquired on Exercise (#)	Value Realized(1) ($)	Number of Unexercised Options/SARs at FY-End (#) Unexercisable/ Exercisable	Value of Unexercised In-the-Money Options/SARs at FY-End ($)(2) Unexercisable/ Exercisable
Lee Kasper	-0-	-0-	0/0	$	0/$0
Joseph Giarmo	-0-	-0-	0/0	$	0/$0
Yegia Eli Aramyan	-0-	-0-	0/0	$	0/$0

(1) Value Realized is determined by calculating the difference between the aggregate exercise price of the options and the aggregate fair market value of the common stock on the date the options are exercised.

(2) The value of unexercised options is determined by calculating the difference between the fair market value of the securities underlying the options at fiscal year end and the exercise price of the options.

33

INDEX TO FINANCIAL STATEMENTS

	Page
Independent Auditors’ Report	F-2
Balance Sheets at December 31, 2001 and 2000	F-3
Statements of Income for the years ended December 31, 2001 and 2000	F-4
Statement of Stockholders’ Equity for the years ended December 31, 2001 and 2000	F-6
Statements of Cash Flows for the years ended December 31, 2001 and 2000	F-7
Notes to Financial Statements	F-8
Independent Accountants’ Review Report	F-17
Balance Sheets at March 31, 2002 and December 31, 2001	F-18
Statements of Income for the three months ended March 31, 2002 and 2001	F-19
Statement of Stockholders’ Equity for the three months ended March 31, 2002 and 2001	F-21
Statements of Cash Flows for the three months ended March 31, 2002 and 2001	F-22
Notes to Financial Statements	F-23

F-1

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Stockholders

NuTech Digital, Inc.

We have audited the accompanying balance sheets of NuTech Digital, Inc. as of December 31, 2001 and 2000 and the related statements of income, stockholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion the financial statements referred to above present fairly, in all material respects, the financial position of NuTech Digital, Inc. as of December 31, 2001 and 2000, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

MOFFITT & COMPANY, P.C.

SCOTTSDALE, ARIZONA

March 2, 2002, reissued June 14, 2002 (Note 21)

F-2

NUTECH DIGITAL, INC.

BALANCE SHEETS

DECEMBER 31, 2001 AND 2000

(REISSUED)

	December 31,
	2001		2000
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	82,978	$	29,926
Accounts receivable		939,166		416,752
Insurance recovery and other receivables		0		1,300
Inventories		897,999		616,092
Royalty advances, current portion		627,817		198,482
Prepaid expenses, current portion		49,675		12,436
Deferred Tax Asset		12,200		0
Total current assets		2,609,835		1,274,988
PROPERTY AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION		1,803,370		1,598,374
OTHER ASSETS
Royalty advances, long-term portion		258,860		183,000
Prepaid expenses, long-term portion		16,334		19,899
Deposits		7,800		6,600
Total other assets		282,994		209,499
Total assets	$	4,696,199	$	3,082,861
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Bank overdraft	$	0	$	52,987
Accounts payable
U-Tech Media Corporation		391,295		0
Other		867,502		1,067,147
Loan payable, officer		4,116		0
Customer deposits		0		6,500
Accrued liabilities		135,834		125,601
Corporation income taxes payable		33,509		0
Note payable, line of credit		496,836		258,896
Notes payable, other, current portion		942,913		129,808
Total current liabilities		2,872,005		1,640,939
LONG TERM LIABILITIES
Notes payable, other, long term portion		770,333		1,225,762
Deferred tax liability		13,600		0
Total long term liabilities		783,933		1,225,762
STOCKHOLDERS’ EQUITY
Common Stock
Authorized—100,000,000 shares, no par value
Issued and outstanding:
December 31, 2001—10,013,551 shares	$	1,008,643	$	0
December 31, 2000—8,300,250 shares		0		1,050
Retained earnings		31,618		215,110
Total stockholders’ equity		1,040,261		216,160
Total liabilities and stockholders’ equity	$	4,696,199	$	3,082,861

See Accompanying Notes and Independent Auditors’ Report.

F-3

NUTECH DIGITAL, INC.

STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

(REISSUED)

	2001		2000
Sales	$	5,021,232	$	4,186,673
Costs of sales		1,134,862		935,310
Gross profit		3,886,370		3,251,363
Selling, general and administrative expenses		3,430,563		2,188,096
Operating income		455,807		1,063,267
Interest expense		253,717		203,088
Income before corporation income taxes		202,090		860,179
Corporation income taxes		34,909		0
Net income	$	167,181	$	860,179
Net income per common share
Basic and diluted	$	.02	$	.10
Weighted average number of common shares outstanding
Basic and diluted		8,992,496		8,300,250

See Accompanying Notes and Independent Auditors’ Report.

F-4

NUTECH DIGITAL, INC.

STATEMENTS OF INCOME—(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

(REISSUED)

Pro Forma Net Income
Pro forma net income if the corporation was taxed as a regular corporation for the whole year:
Income before corporation income taxes	$	202,090	$	860,179
Corporation income taxes		73,000		266,600
Pro forma net income	$	129,090	$	593,579
Net income per common share:
Basic and diluted
Pro forma net income	$	.01	$	.07
Weighted average number of common shares outstanding		8,992,496		8,300,250

Stock warrants to purchase 633,446 shares of common stock were not dilutive and, therefore were not included in the computations of diluted income per common share amounts.

See Accompanying Notes and Independent Auditors’ Report.

F-5

NUTECH DIGITAL, INC.

STATEMENT OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

(REISSUED)

	Common Stock				Retained Earnings			Total
	Shares	Amount
Balance, January 1, 2000	7,905,000	$	1,000		$	(422,680	)	$	(421,680	)
Issuance of common stock for services	395,250		50			0			50
Dividends paid	0		0			(222,389	)		(222,389	)
Net income for the year ended December 31, 2000	0		0			860,179			860,179
Balance, December 31, 2000	8,300,250		1,050			215,110			216,160
Issuance of common stock for:
Cash-private placement	633,446		950,200			0			950,200
Options	100,000		100,000			0			100,000
Services	850,000		25,500			0			25,500
Accounts payable	53,333		80,000			0			80,000
Costs incurred for private placement—paid by:
Cash	0		(172,107	)		0			(172,107	)
Services	76,522		114,783			0			0
			(114,783	)
Dividends paid	0		0			(326,673	)		(326,673	)
Net income for the year ended December 31, 2001	0		0			167,181			167,181
Transfer Subchapter “S” undistributed income to common stock	0		24,000			(24,000	)		0
Balance, December 31, 2001	10,013,551	$	1,008,643		$	31,618		$	1,040,261

See Accompanying Notes and Independent Auditors’ Report.

F-6

NUTECH DIGITAL, INC.

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

(REISSUED)

	2001			2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	167,181		$	860,179
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Depreciation		539,099			400,980
Allowance of doubtful accounts		10,000			30,000
Issuance of common stock for services		25,500			50
Deferred tax assets/liabilities		1,400			0
Changes in operating assets and liabilities:
Accounts receivable		(532,414	)		196,167
Insurance recovery and other receivables		1,300			23,700
Inventories		(281,907	)		(319,294	)
Royalty advances		(505,195	)		1,624
Prepaid expenses		(33,674	)		(27,600	)
Deposits		(1,200	)		0
Accounts payable		351,650			(86,087	)
Customer deposits		(6,500	)		(89,226	)
Accrued liabilities		10,233			(58,271	)
Corporation income taxes payable		33,509			0
Net cash provided (used) by operating activities		(221,018	)		932,222
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(744,095	)		(863,526	)
Net cash (used) by investing activities		(744,095	)		(863,526	)
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft		(52,987	)		52,987
Dividends paid		(326,673	)		(222,389	)
Net proceeds from issuance of common stock		878,093			0
Proceeds from notes payable, other		388,439			900,000
Repayments of notes payable and bank lines of credit		(369,659	)		(690,541	)
Proceeds from bank line of credit		496,836			0
Changes in loans payable, officer		4,116			(136,810	)
Net cash provided (used) by financing activities		1,018,165			(96,753	)
Net increase (decrease) in cash	$	53,052		$	(28,057	)
Cash balance at beginning of year		29,926			57,983
Cash balance at end of year	$	82,978		$	29,926
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year:
Interest	$	232,849		$	198,966
Taxes	$	5,469		$	0
Non-cash investing and financing activities:
Issuance of common stock for services	$	25,500		$	50
Issuance of common stock for corporate debt	$	180,000		$	0
Issuance of common stock for private placement costs	$	114,783		$	0

See Accompanying Notes and Independent Auditors’ Report.

F-7

NUTECH DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2001 AND 2000

(REISSUED)

NOTE 1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

NuTech Digital, Inc. was organized on June 12, 1997, under the laws of the state of California. The Company is engaged in creating, licensing and distributing general entertainment products, most of which are made available through digital versatile disc (“DVD”). The Company’s products include children’s animated films and video games, Karoake software, Japanese anime and late night programming.

Restatement of Common Stock

In May, 2001, the Company effected a stock split whereby each stockholder received 7,905 shares for every 1 share owned. The stock split has been retroactively recorded in the financial statements as if it occurred at the date of inception.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

Inventories

Inventories are stated at the lower of cost (determined by the first-in, first-out method) or market.

Property and Equipment

Property and equipment are stated at cost. Major renewals and improvements are charged to the asset accounts while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed. At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are credited or charged to income.

The Company depreciates its property and equipment for financial reporting purposes using the straight-line method based upon the following useful lives of the assets:

Completed Masters	7 years
Office furniture and equipment	7 years
Computer equipment	5–7 years
Warehouse equipment	7–10 years
Trade show equipment	7 years
Leasehold improvements	3–10 years

Accounting Estimates

Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used.

See Accompanying Notes and Independent Auditors’ Report.

F-8

NUTECH DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

DECEMBER 31, 2001 AND 2000

(REISSUED)

Revenue Recognition

The Company recognizes revenue from product sales when the goods are shipped and title passes to customers.

Disclosure About Fair Value of Financial Instruments

The Company has financial instruments, none of which are held for trading purposes. The Company estimates that the fair value of all financial instruments at December 31, 2001 and 2000 as defined in FASB 107, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying balance sheets. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value, and accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

Net Earnings Per Share

The Company adopted Statement of Financial Accounting Standards No. 128 that requires the reporting of both basic and diluted earnings per share. Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. In accordance with FASB 128, any anti-dilutive effects on net income per share are excluded.

Income Taxes

Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax basis of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled as prescribed in FASB Statement No. 109, Accounting for Income Taxes. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

Common Stock Issued for Non-Cash Transactions

It is the Company’s policy to value stock issued for non-cash transactions, such as services, at the fair market value at the date the transaction is negotiated. The number of shares issued for the $25,500 of services rendered were negotiated before the private placement.

Long-Lived Assets

Statement of Financial Accounting Standards No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be appropriate. The Company assesses the recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash

See Accompanying Notes and Independent Auditors’ Report.

F-9

NUTECH DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

DECEMBER 31, 2001 AND 2000

(REISSUED)

flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value. This standard did not have a material effect on the Company’s results of operations, cash flows or financial position.

Shipping and Handling Costs

The Company’s policy is to classify shipping and handling costs as part of selling, general and administrative costs in the statements of income. These costs for the years ended December 31, 2001 and 2000 amounted to $115,133 and $36,618, respectively.

NOTE 2.    ACCOUNTS RECEIVABLE

A summary of accounts receivable and allowance for doubtful accounts is as follows:

	2001		2000
Accounts receivable	$	979,166	$	446,752
Allowance for doubtful accounts		40,000		30,000
Net accounts receivable	$	939,166	$	416,752

NOTE 3.    INVENTORIES

The inventories are comprised of completed DVDs and karaoke CDs.

NOTE 4.    ADVANCE ROYALTIES

The Company has acquired the licensing, manufacturing and distribution rights to various movies from the owners of the titles. The Company pays royalties from 20%–30% of the net sales proceeds. Royalty costs for the years ended December 31, 2001 and 2000 were $626,577 and $535,746, respectively.

NOTE 5.    PROPERTY AND EQUIPMENT

Property and equipment and accumulated depreciation and amortization consists of :

	2001		2000
Completed masters	$	3,590,602	$	3,123,041
Office furniture and equipment		102,033		51,998
Computer equipment		155,202		97,244
Warehouse equipment		96,086		19,618
Trade show equipment		21,940		16,840
Leasehold improvements		86,972		30,943
		4,052,835		3,339,684
Less accumulated depreciation		2,249,465		1,741,310
	$	1,803,370	$	1,598,374

See Accompanying Notes and Independent Auditors’ Report.

F-10

NUTECH DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

DECEMBER 31, 2001 AND 2000

(REISSUED)

NOTE 6.    LOAN PAYABLE, OFFICER

Periodically, the president of the Company will advance the Company funds to pay corporation obligations. The balance due to the officer is payable on demand, bears interest at 7% and is unsecured. The loan balance at December 31, 2001 was $4,116.

NOTE 7.    CUSTOMER DEPOSITS

In certain circumstances, the Company obtains a portion of the sales price when orders are received. These funds are recorded as customer deposits and are applied to the customer invoices when the merchandise is shipped.

NOTE 8.    INCOME TAXES

From January 1, 2000 to May 31, 2001, the Company, with the consent of its stockholders, elected under the Internal Revenue Code to be an S corporation. In lieu of corporation income taxes, the stockholders of an S corporation are taxed based on their proportionate share of the Company’s taxable income. Therefore, no provision or liability for U. S. corporation income taxes has been computed for the period from January 1, 2000 to May 31, 2001.

On June 1, 2001, the corporation became taxed as a C corporation. The provision for income tax for the year ended December 31, 2001 is estimated as follows:

Income tax estimated to be payable currently	$	33,509
Deferred income tax		1,400
Total provision	$	34,909

A reconciliation of the provision for income taxes compared with the amounts at U.S. federal statutory rate is as follows:

Tax at U.S. federal statutory income tax rates	$	23,987
State income taxes		9,522
Benefits and taxes due to timing differences for expense deductions		1,400
Total income tax	$	34,909

The following is a summary of the significant components of the Company’s deferred tax assets and liabilities:

Deferred tax assets:
Timing differences for expense deductions	$	12,200
Valuation allowance		0
Deferred tax asset, net of valuation allowance	$	12,200
Deferred tax liabilities:
Depreciation	$	13,600

See Accompanying Notes and Independent Auditors’ Report.

F-11

NUTECH DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

DECEMBER 31, 2001 AND 2000

(REISSUED)

Summary of valuation allowance:
At date converted from S corporation to C corporation	$	0
Addition for C corporation year		0
Valuation allowance at December 31, 2001	$	0

Realization of the net deferred tax assets is dependent on future reversals of existing taxable temporary differences and adequate future taxable income, exclusive of reversing temporary differences and carryforwards. Although realization is not assured, management believes that it is more likely than not that the net deferred tax assets will be realized. The amount of the net deferred tax assets considered realizable, however, could be reduced in the near term if actual future taxable income is lower than estimated, or if there are differences in the timing or amount of future reversals of existing taxable temporary differences.

NOTE 9.    NOTES PAYABLE, LINE OF CREDIT

	2001		2000
On January 27, 1998, the Company received a $400,000 line of credit from Pre-Banc Business Credit, Inc. The note was secured by all assets of the Company and accrued interest at  1/12 of 1% per day with a monthly minimum interest charge of $1,000	$	0	$	258,896
On March 20, 2001, the Company received a $500,000 revolving line of credit from U.S. Bank National Association. The loan is secured by a first priority security interest in accounts receivable, inventory, equipment and general intangibles. The note bears interest at 1.75% over prime and requires monthly payments of interest with the principal balance due on April 30, 2002. The note is guaranteed by the principal stockholder of the corporation. The note contains covenants regarding working capital and debt to equity ratios. Effective interest rate at December 31, 2001 was 6.5%		496,836		0
	$	496,836	$	258,896

See Accompanying Notes and Independent Auditors’ Report.

F-12

NUTECH DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

DECEMBER 31, 2001 AND 2000

(REISSUED)

NOTE 10.    NOTES PAYABLE, OTHER

	2001		2000
RITEK CORP.	$	400,000	$	400,000
In August 1998, the Company received a $400,000 loan from Ritek Corp. The loan is secured by a deed of trust on property owned by the principal stockholder, accrues interest at 8.5% per annum and entitles Ritek Corp. to 50% ownership in the licensing rights in the Shadoan DVD Game. The loan requires monthly payments of interest and principal with the agreement that the total loan and interest was to be paid on June 10, 1999. If the loan was not paid on that date, then Ritek could become 100% owner and license holder of the title “Shadoan”. As of the date of this report, Ritek has not asked for the ownership rights to Shadoan, and Ritek is accepting monthly interest payments on the note.
SMALL BUSINESS ADMINISTRATION LOAN AND COMERICA     BANK LOAN		831,470		880,570
On July 12, 2000, the Company received a $900,000 Small Business Administration loan with Comerica Bank participation. The loan requires monthly payments of $11,569 including interest at 2% over prime. The loan is secured by all assets of the Company and the major stockholder’s personal residence and personal guaranty. The loan matures on July 12, 2010. Effective interest rates at December 31, 2001 and 2000 was 6.75% and 11.5%, respectively.
ADVANCED MEDIA POST		210,000		0
On March 1, 2001, the Company received a $210,000 loan from Advanced Media Post. The note requires monthly interest payments of $1,750 (10%) and is due on May 1, 2002. The loan is unsecured and is guaranteed by the principal stockholder of the corporation. (See Note 20)
ELYNOR KASPER (MOTHER OF THE PRESIDENT OF THE COMPANY)		60,000		75,000
Unsecured, 10% note with no due date.
ANNABELLE SCHNITMAN		58,337		0
On February 13, 2001, the Company received a $100,000 loan from Annabelle Schnitman. The note is unsecured and does not have a stated interest rate. However, the Company is required to make monthly payments of $16,666 (totaling $200,000) on the loan. The loan is due on July 20, 2002.
JOE GIARMO		55,000		0
On March 5, 2001, the Company received a $60,000 loan from Joe Giarmo. The Company is required to repay this loan on a monthly basis determined by paying $0.25 for each VHS or DVD sold pursuant to the KSS Inc. license until $120,000 is repaid.
URBACH, KAHN & WERLIN		80,000		0
On December 31, 2001, the Company converted an account payable with Urbach, Kahn & Werlin into a note payable. The note is secured by all assets of the Company, requires monthly payments of $6,932 including interest at 7.25% and matures on June 28, 2002. (See Note 20)
OTHER NOTES		18,439		0
The Company has three loans from children of the principal stockholder. The loans are unsecured, bear interest at 7% and are payable on demand.
Total notes		1,713,246		1,355,570
Less current portion		942,913		129,808
Long-term portion	$	770,333	$	1,225,762

See Accompanying Notes and Independent Auditors’ Report.

F-13

NUTECH DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

DECEMBER 31, 2001 AND 2000

(REISSUED)

Maturities on long-term debt are as follows:

December 31, 2002	$	942,913
December 31, 2003		68,211
December 31, 2004		76,105
December 31, 2005		84,912
Thereafter		541,105
	$	1,713,246

NOTE 11.    ADVERTISING

The Company expenses all advertising as incurred. Advertising expenses for the years ended December 31, 2001 and 2000 were $39,954 and $52,898, respectively.

NOTE 12.    REAL ESTATE LEASE

On May 1, 2001, the Company leased its office and warehouse facilities for five years and three months. The details on the lease are as follows:

A. Base rentals—$7,800 per month plus operating costs with cost of living adjustments in May of each year.

B. Termination date—July 31, 2006

C. Option—one option for an additional 60 month period with rent at the base rental amount plus cost of living adjustments.

Future minimum lease payments excluding operating expenses are as follows:

December 31, 2002	$	93,600
December 31, 2003		93,600
December 31, 2004		93,600
December 31, 2005		93,600
December 31, 2006		93,600

The rent expense for the years ended December 31, 2001 and 2000 was $68,930 and $48,224, respectively.

NOTE 13.    LEGAL AND ACCOUNTING FEES

Legal and accounting fees for the years ended December 31, 2001 and 2000 were $122,030 and $261,449, respectively.

NOTE 14.    EQUITY INCENTIVE PLAN

The Board of Directors and stockholders approved the NuTech Digital, Inc. 2001 Equity Incentive Plan which permits the Board of Directors to grant, for a ten year period, both stock purchase rights and stock options. The Company has reserved 2,500,000 shares of its common stock for issuance to the directors, employees and consultants under the Plan. The Plan is administered by the Board of Directors. The administrator has the

See Accompanying Notes and Independent Auditors’ Report.

F-14

NUTECH DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

DECEMBER 31, 2001 AND 2000

(REISSUED)

authority and discretion, subject to the provisions of the Plan, to select persons to whom stock purchase rights or options will be granted, to designate the number of shares to be covered by each option or stock purchase right, to specify the type of consideration to be paid, and to establish all other terms and conditions of each option or stock purchase right. Options granted under the Plan will not have a term that exceeds ten years from date of grant. As of the date of this report, the Company has not issued any stock options.

NOTE 15.    COMMON STOCK PURCHASE WARRANTS

The following is a summary of the stock purchase warrants outstanding as of December 31, 2001:

Number of shares	633,446
Price per share	$3.00
Expiration date	May 31, 2011

NOTE 16.    MAJOR CUSTOMERS

	2001		2000
The Company has one customer that accounted for the following percentage of company sales	10	%	23	%

NOTE 17.    MAJOR SUPPLIERS

For the year ended December 31, 2001, the Company purchased 60% of its merchandise from one supplier.

In the year ended December 31, 2000, the Company purchased from 13%–30% of its merchandise from three suppliers.

NOTE 18.    STOCK ACQUISITION AGREEMENT

In May 2000, the Company entered into a stock acquisition agreement with one of the stockholders/officers of the Company who owns 395,250 shares of the Company’s common stock. The stockholder cannot transfer, sell, assign or otherwise dispose of his Company stock without the consent of the Company. The Company and the principal stockholder shall have an option and right of first refusal to acquire the stock at fair market value in the event the stockholder requests to dispose of his shares.

NOTE 19.    PRIVATE PLACEMENT

On May 25, 2001, the Company issued a private placement for 120 units with each unit consisting of 16,666 shares of common stock at a purchase price of $1.50 per share ($25,000 per unit) and a warrant to purchase 16,666 shares of common stock at $3.00 per share.

The total offering was for 1,999,920 shares of which 633,446 shares were issued as of December 31, 2001 and an additional 16,666 shares were issued from January 1, 2002 to the date of this report.

See Accompanying Notes and Independent Auditors’ Report.

F-15

NUTECH DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

DECEMBER 31, 2001 AND 2000

(REISSUED)

NOTE 20.    SUBSEQUENT ISSUANCES OF COMMON STOCK

Subsequent to December 31, 2001, the Company issued the following shares of common stock for:

Cash—16,666 shares for	$	25,000
Note payable—Urbach, Kahn & Werlin—53,333 shares for		80,000
Note payable—Advance Media Post—165,000 shares for		247,500

NOTE 21.    REISSUED FINANCIAL STATEMENTS

The financial statements have been reissued to increase the disclosures detailed in the financial statements.

See Accompanying Notes and Independent Auditors’ Report.

F-16

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

To the Board of Directors and Stockholders

NuTech Digital, Inc.

We have reviewed the accompanying balance sheet of NuTech Digital, Inc. as of March 31, 2002 and the related statements of income and cash flows for the three months ended March 31, 2002 and 2001 and the statement of stockholders’ equity for the three months ended March 31, 2002 in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these financial statements is the representation of the management of NuTech Digital, Inc.

A review consists principally of inquiries of company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America.

We have audited, in accordance with auditing standards generally accepted in the United States of America, the balance sheet of NuTech Digital, Inc. as of December 31, 2001, and the related statements of income, stockholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated March 2, 2002 we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying balance sheet as of December 31, 2001, is fairly stated in all material respects in relation to the balance sheet from which it has been derived.

MOFFITT & COMPANY, P.C.

SCOTTSDALE, ARIZONA

April 23, 2002, reissued June 14, 2002 (Note 17)

F-17

NUTECH DIGITAL, INC.

BALANCE SHEETS

MARCH 31, 2002 AND DECEMBER 31, 2001

(REISSUED)

	March 31, 2002			December 31, 2001
	(Unaudited)			(Audited)
ASSETS
CURRENT ASSETS
Cash	$	34,449		$	82,978
Accounts receivable, net		565,213			939,166
Advance to officer		16,237			0
Corporation income tax refund		44,522			0
Inventory		988,227			897,999
Royalty advances, current portion		315,312			627,817
Prepaid expenses, current portion		160,505			49,675
Deferred tax asset		40,017			12,200
Total current assets		2,164,482			2,609,835
Property and equipment, net of accumulated depreciation		1,860,040			1,803,370
OTHER ASSETS
Royalty advances, long-term portion		792,788			258,860
Prepaid expenses, long-term portion		18,656			16,334
Deposits		7,800			7,800
Total other assets		819,244			282,994
Total assets	$	4,843,766		$	4,696,199
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	1,587,315		$	1,258,797
Loan payable, officer		0			4,116
Accrued liabilities		75,512			135,834
Corporation income taxes payable		9,522			33,509
Note payable, line of credit		453,000			496,836
Note payable, other, current portion		652,593			942,913
Total current liabilities		2,777,942			2,872,005
LONG TERM LIABILITIES
Notes payable, other, long term portion		746,493			770,333
Deferred tax liability		17,500			13,600
Total long term liabilities		763,993			783,933
STOCKHOLDERS’ EQUITY
Common Stock Authorized—100,000,000 shares, no par value issued and outstanding:
March 31, 2002—10,248,550	$	1,358,893		$	0
December 31, 2001—10,013,551 shares		0			1,008,643
Retained earnings (deficit)		(57,062	)		31,618
Total stockholders’ equity		1,301,831			1,040,261
Total liabilities and stockholders’ equity	$	4,843,766		$	4,696,199

See Accompanying Notes and Independent Accountants’ Review Report.

F-18

NUTECH DIGITAL, INC.

STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001

(UNAUDITED)

(REISSUED)

	2002			2001
Sales	$	1,111,471		$	962,039
Costs of sales		308,132			272,385
Gross profit		803,339			689,654
Selling, general and administrative expenses		883,271			580,251
Operating income (loss)		(79,932	)		109,403
Interest expense		66,174			50,914
Income before corporation income taxes (benefit)		(146,106	)		58,489
Corporation income taxes (benefit)		(57,426	)		0
Net income (loss)	$	(88,680	)	$	58,489
Net income per common share:
Basic and diluted	$	(.01	)	$	.01
Weighted average number of common shares outstanding
Basic and diluted		10,097,440			8,300,250

See Accompanying Notes and Independent Accountants’ Review Report.

F-19

NUTECH DIGITAL, INC.

STATEMENTS OF INCOME—(Continued)

FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001

(UNAUDITED)

(REISSUED)

Pro Forma Net Income for March 31, 2001
Pro forma net income if the corporation was taxed as a regular corporation for the whole year:
Income before corporation income taxes	$	58,489
Corporation income taxes		13,132
Pro forma net income	$	45,357
Net income per common share:
Basic and diluted
Pro forma net income	$	.01
Weighted average number of common shares outstanding
Basic and diluted		8,300,250

Stock warrants to purchase 703,444 shares of common stock were not included in the computations of diluted income per common share amounts.

See Accompanying Notes and Independent Accountants’ Review Report.

F-20

NUTECH DIGITAL, INC.

STATEMENT OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2002

(UNAUDITED)

(REISSUED)

	Common Stock				Retained Earnings (Deficit)			Total
	Shares	Amount
Balance, January 1, 2002	10,013,551	$	1,008,643		$	31,618		$	1,040,261
Issuance of common stock for:
Cash-private placement	16,666		25,000			0			25,000
Notes payable	218,333		327,500			0			327,500
Costs incurred for private placement—paid by cash	0		(2,250	)		0			(2,250	)
Net (loss) for the three months ended March 31, 2002	0		0			(88,680	)		(88,680	)
Balance, March 31, 2002	10,248,550	$	1,358,893		$	(57,062	)	$	1,301,831

See Accompanying Notes and Independent Accountants’ Review Report.

F-21

NUTECH DIGITAL, INC.

STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001

(UNAUDITED)

(REISSUED)

	2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(88,680	)	$	58,489
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation		145,299			103,241
Deferred tax assets/liabilities		(23,917	)		0
Changes in operating assets and liabilities:
Accounts receivable		373,953			241,738
Advance to officer		(16,237	)		(52,385	)
Corporation income tax refund		(44,522	)		0
Inventories		(90,228	)		10,250
Royalty advances		(221,423	)		(233,300	)
Prepaid expenses		(113,152	)		(23,466	)
Accounts payable		328,518			(458,260	)
Accrued liabilities		(22,822	)		11,363
Corporation income taxes payable		(23,987	)		0
Net cash provided (used) by operating activities		202,802			(342,330	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(201,969	)		(211,073	)
Net cash (used) by investing activities		(201,969	)		(211,073	)
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft		0			(39,763	)
Net proceeds from issuance of common stock		22,750			0
Proceeds from notes payable, other		10,000			397,276
Repayments of notes payable and bank lines of credit		(77,996	)		0
Proceeds from bank line of credit		0			150,964
Changes in loans payable, officer		(4,116	)		15,000
Net cash provided (used) by financing activities		(49,362	)		523,477
Net (decrease) in cash		(48,529	)		(29,926	)
Cash balance at beginning of period		82,978			29,926
Cash balance at end of period	$	34,449		$	0
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year:
Interest	$	101,748		$	232,849
Taxes	$	30,000		$	5,469
NON-CASH INVESTING AND FINANCING ACTIVITIES
Issuance of common stock for services	$	0		$	25,500
Issuance of common stock for accounts and notes payable	$	327,500		$	80,000
Issuance of common stock for private placement costs	$	0		$	114,783

See Accompanying Notes and Independent Accountants’ Review Report.

F-22

NUTECH DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2002 AND 2001

(UNAUDITED)

(REISSUED)

NOTE 1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

NuTech Digital, Inc. was organized on June 12, 1997, under the laws of the state of California. The Company is engaged in creating, licensing and distributing general entertainment products, most of which are made available through digital versatile disc (“DVD”). The Company’s products include children’s animated films and video games, Karoake software, Japanese anime and late night programming.

Restatement of Common Stock

In May, 2001, the Company effected a stock split whereby each stockholder received 7,905 shares for every 1 share owned. The stock split has been retroactively recorded in the financial statements as if it occurred at the date of inception.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

Accounts Receivable

Accounts receivable are reported at the customers’ outstanding balances less any allowance for doubtful accounts.

Allowance for Doubtful Accounts

The allowance for doubtful accounts on accounts receivables is charged to income in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover any possible losses.

Inventories

Inventories are stated at the lower of cost (determined by the first-in, first-out method) or market.

Property and Equipment

Property and equipment are stated at cost. Major renewals and improvements are charged to the asset accounts while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed. At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are credited or charged to income.

See Accompanying Notes and Independent Accountants’ Review Report.

F-23

NUTECH DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

MARCH 31, 2002 AND 2001

(UNAUDITED)

(REISSUED)

The Company depreciates its property and equipment for financial reporting purposes using the straight-line method based upon the following useful lives of the assets:

Completed masters	7 years
Office furniture and equipment	7 years
Computer equipment	5–7 years
Warehouse equipment	7–10 years
Trade show equipment	7 years
Leasehold improvements	3–10 years

Accounting Estimates

Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used.

Revenue Recognition

The Company recognizes revenue from product sales when the goods are shipped and title passes to customers.

Disclosure About Fair Value of Financial Instruments

The Company has financial instruments, none of which are held for trading purposes. The Company estimates that the fair value of all financial instruments at March 31, 2002 and December 31, 2001 as defined in FASB 107, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying balance sheets. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgement is required in interpreting market data to develop the estimates of fair value, and accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

Net Earnings (Loss) Per Share

The Company adopted Statement of Financial Accounting Standards No. 128 that requires the reporting of both basic and diluted earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. In accordance with FASB 128, any anti-dilutive effects on net income (loss) per share are excluded.

Income Taxes

Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax basis of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled as prescribed in FASB Statement No. 109, Accounting for Income Taxes. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

See Accompanying Notes and Independent Accountants’ Review Report.

F-24

NUTECH DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

MARCH 31, 2002 AND 2001

(UNAUDITED)

(REISSUED)

Common Stock Issued for Non-Cash Transactions

It is the Company’s policy to value stock issued for non-cash transactions, such as services, at the fair market value at the date the transaction is negotiated.

Long-Lived Assets

Statement of Financial Accounting Standards No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be appropriate. The Company assesses the recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value. This standard did not have a material effect on the Company’s results of operations, cash flows or financial position.

Shipping and Handling Costs

The Company’s policy is to classify shipping and handling costs as part of selling, general and administrative costs in the statements of income. These costs for the three months ended March 31, 2002 and 2001 amounted to $28,476 and $10,852, respectively.

NOTE 2.    ACCOUNTS RECEIVABLE

A summary of accounts receivable and allowance for doubtful accounts is as follows:

	2002		2001
Accounts receivable	$	605,213	$	979,166
Allowance for doubtful accounts		40,000		40,000
Net accounts receivable	$	565,213	$	939,166

NOTE 3.    INVENTORIES

The inventories are comprised of completed DVD’S and Karoake CD’S.

NOTE 4.    ADVANCE ROYALTIES

The Company has acquired the licensing, manufacturing and distribution rights to various movies from the owners of the titles. The Company pays royalties from 20%-30% of the net sales proceeds. Royalty costs for the three months ended March 31, 2002 and 2001 were $97,394 and $77,879, respectively.

See Accompanying Notes and Independent Accountants’ Review Report.

F-25

NUTECH DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

MARCH 31, 2002 AND 2001

(UNAUDITED)

(REISSUED)

NOTE 5.    PROPERTY AND EQUIPMENT

Property and equipment and accumulated depreciation and amortization consists of:

	March 31, 2002		December 31, 2001
	(Unaudited)		(Audited)
Completed masters	$	3,786,290	$	3,590,602
Office furniture and equipment		102,033		102,033
Computer equipment		160,901		155,202
Warehouse equipment		96,086		96,086
Trade show equipment		21,940		21,940
Leasehold improvements		87,554		86,972
		4,254,804		4,052,835
Less accumulated depreciation		2,394,764		2,249,465
	$	1,860,040	$	1,803,370

NOTE 6.    INCOME TAXES

From January 1, 2000 to May 31, 2001, the Company, with the consent of its stockholders, elected under the Internal Revenue Code to be an S corporation. In lieu of corporation income taxes, the stockholders of an S corporation are taxed based on their proportionate share of the Company’s taxable income. Therefore, no provision or liability for U. S. corporation income taxes has been computed for the period from January 1, 2000 to May 31, 2001.

On June 1, 2001, the corporation became taxed as a C corporation. The provision for income tax for the three months ended March 31, 2002 is estimated as follows:

Income tax estimated to be refunded currently	$	0
Deferred income tax (benefit)		(57,426	)
Total tax (benefit)	$	(57,426	)

A reconciliation of the provision for income taxes compared with the amounts at U.S. federal statutory rate is as follows:

Tax (benefit) at U.S. federal statutory income tax rates	$	(33,509	)
Benefits and taxes due to timing differences for expense deductions		(23,917	)
Total income tax (benefit)	$	(57,426	)

See Accompanying Notes and Independent Accountants’ Review Report.

F-26

NUTECH DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

MARCH 31, 2002 AND 2001

(UNAUDITED)

(REISSUED)

The following is a summary of the significant components of the Company’s deferred tax assets and liabilities:

Deferred tax assets:
Timing differences for expense deductions	$	40,017
Valuation allowance		0
Deferred tax asset, net of valuation allowance	$	40,017
Deferred tax liabilities:
Depreciation	$	17,500

Summary of valuation allowance:

Balance at January 1, 2002	$	0
Addition for the three months ended March 31, 2002		0
Balance at March 31, 2002	$	0

Realization of the net deferred tax assets is dependent on future reversals of existing taxable temporary differences and adequate future taxable income, exclusive of reversing temporary differences and carryforwards. Although realization is not assured, management believes that it is more likely than not that the net deferred tax assets will be realized. The amount of the net deferred tax assets considered realizable, however, could be reduced in the near term if actual future taxable income is lower than estimated, or if there are differences in the timing or amount of future reversals of existing taxable temporary differences.

NOTE 7.    NOTES PAYABLE, LINE OF CREDIT

	March 31, 2002		December 31, 2001
	(Unaudited)		(Audited)
On March 20, 2002, the Company received a $650,000 revolving line of credit from U.S. Bank National Association. The loan is secured by a first priority security interest in accounts receivable, inventory, equipment and general intangibles. The note bears interest at 1.75% over prime and requires monthly payments of interest with the principal balance due on April 30, 2003. The note is guaranteed by the principal stockholder of the corporation. The note contains covenants regarding working capital and debt to equity ratios, tangible net worth and matures on April 30, 2003. Effective interest rate at March 31, 2002 and December 31, 2001 was 6.5%.	$	453,000	$	496,836

See Accompanying Notes and Independent Accountants’ Review Report.

F-27

NUTECH DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

MARCH 31, 2002 AND 2001

(UNAUDITED)

(REISSUED)

NOTE 8.    NOTES PAYABLE, OTHER

	March 31, 2002		December 31, 2001
	(Unaudited)		(Audited)
RITEK CORP.	$	400,000	$400,000
In August 1998, the Company received a $400,000 loan from Ritek Corp. The loan is secured by a deed of trust on property owned by the principal stockholder, accrues interest at 8.5% per annum and entitles Ritek Corp. to 50% ownership in the licensing rights in the Shadoan DVD Game. The loan requires monthly payments of interest and principal with the agreement that the total loan and interest was to be paid on June 10, 1999. If the loan was not paid on that date, then Ritek could become 100% owner and license holder of the title “Shadoan”. As of the date of this report, Ritek has not asked for the ownership rights to Shadoan, and Ritek is accepting monthly interest payments on the note.
SMALL BUSINESS ADMINISTRATION LOAN AND COMERICA BANK LOAN		813,976	831,470
On July 12, 2000, the Company received a $900,000 Small Business Administration loan with Comerica Bank participation. The loan requires monthly payments of $10,582 including interest at 2% over prime. The loan is secured by all assets of the Company and the major stockholder’s personal residence and personal guaranty. The  loan matures on July 12, 2010. Effective interest rate at March 31, 2002 and December 31, 2001 was 6.75%.
ADVANCED MEDIA POST		0	210,000
On March 1, 2001, the Company received a $210,000 loan from Advanced Media Post. The note requires monthly interest payments of $1,750 (10%) and is due on May 1, 2002. The loan is unsecured and is guaranteed by the principal stockholder of the corporation. The Company paid this note by issuing 165,000 shares of common stock.
ELYNOR KASPER (MOTHER OF THE PRESIDENT OF THE COMPANY)		60,000	60,000
Unsecured, 10% note with no due date.
ANNABELLE SCHNITMAN		41,671	58,337
On February 13, 2001, the Company received a $100,000 loan from Annabelle Schnitman. The note is unsecured and does not have a stated interest rate. However, the Company is required to make monthly payments of $16,666 (totaling $200,000) on the loan. The loan is due on July 20, 2002.
JOE GIARMO		65,000	55,000
On March 5, 2001, the Company received a $60,000 loan from Joe Giarmo. The Company is required to repay this loan on a monthly basis determined by paying $0.25 for each VHS or DVD sold pursuant to the KSS Inc. license until $120,000 is repaid.
URBACH, KAHN & WERLIN		0	80,000
On December 31, 2001, the Company converted an account payable with Urbach, Kahn & Werlin into a note payable. The note is secured by all assets of the Company, requires monthly payments of $6,932 including interest at 7.25% and matures on June 28, 2002. The Company paid this note by issuing 53,333 shares of common stock.

See Accompanying Notes and Independent Accountants’ Review Report.

F-28

NUTECH DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

MARCH 31, 2002 AND 2001

(UNAUDITED)

(REISSUED)

	March 31, 2002		December 31, 2001
	(Unaudited)		(Audited)
OTHER NOTES	$	18,439	$	18,439
The Company has three loans from children of the principal stockholder. The loans are unsecured, bear interest at 7% and are payable on demand.
Total notes		1,399,086		1,713,246
Less current portion		652,593		942,913
Long-term portion	$	746,493	$	770,333

Maturities on long-term debt are as follows:

March 31, 2003	$	652,593
March 31, 2004		70,105
March 31, 2005		78,217
March 31, 2006		87,268
Thereafter		510,903
	$	1,399,086

NOTE 9.     ADVERTISING

The Company expenses all advertising as incurred. Advertising expenses for the three months ended March 31, 2002 and 2001 were $29,915 and $8,238, respectively.

NOTE 10.    REAL ESTATE LEASE

On May 1, 2001, the Company leased its office and warehouse facilities for five years and three months. The details on the lease are as follows:

A. Base rentals—$7,800 per month plus operating costs with cost of living adjustments in May of each year.

B. Termination date—July 31, 2006

C. Option—one option for an additional 60 month period with rent at the base rental amount plus cost of living adjustments.

As of March 31, 2002, future minimum lease payments excluding operating expenses are as follows:

March 31, 2003	$93,600
March 31, 2004	93,600
March 31, 2005	93,600
March 31, 2006	93,600
March 31, 2007	54,600

The rent expense for the three months ended March 31, 2002 and 2001 was $26,426 and $9,900, respectively.

See Accompanying Notes and Independent Accountants’ Review Report.

F-29

NUTECH DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

MARCH 31, 2002 AND 2001

(UNAUDITED)

(REISSUED)

NOTE 11.    EQUITY INCENTIVE PLAN

The Board of Directors and stockholders approved the NuTech Digital, Inc. 2001 Equity Incentive Plan which permits the Board of Directors to grant, for a ten year period, both stock purchase rights and stock options. The Company has reserved 3,500,000 shares of its common stock for issuance to the directors, employees and consultants under the Plan. The Plan is administered by the Board of Directors. The administrator has the authority and discretion, subject to the provisions of the Plan, to select persons to whom stock purchase rights or options will be granted, to designate the number of shares to be covered by each option or stock purchase right, to specify the type of consideration to be paid, and to establish all other terms and conditions of each option or stock purchase right. Options granted under the Plan will not have a term that exceeds ten years from date of grant. On April 15, 2002, the Company granted 1,705,000 options at $1.50 per share.

NOTE 12.    COMMON STOCK PURCHASE WARRANTS

The following is a summary of the stock purchase warrants outstanding as of March 31, 2002:

Number of shares		703,444
Price per share	$	3.00
Expiration date		May 31, 2011

NOTE 13.    MAJOR CUSTOMERS

	2002		2001
The Company has one customer that accounted for the following percentage of company sales:	10	%	23	%

NOTE 14.    MAJOR SUPPLIERS

The Company purchased merchandise from several suppliers as follows:

	Percent of Total Purchases
Supplier	2002		2001
A	37	%	77	%
B	22	%	0	%
C	13	%	0	%

NOTE 15.    STOCK ACQUISITION AGREEMENT

In May 2000, the Company entered into a stock acquisition agreement with one of the stockholders/officers of the Company who owns 395,250 shares of the Company’s common stock. The stockholder can not transfer, sell, assign or otherwise dispose of his Company stock without the consent of the Company. The Company and the principal stockholder shall have an option and right of first refusal to acquire the stock at fair market value in the event the stockholder requests to dispose of his shares.

See Accompanying Notes and Independent Accountants’ Review Report.

F-30

NUTECH DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

MARCH 31, 2002 AND 2001

(UNAUDITED)

(REISSUED)

NOTE 16.    UNAUDITED FINANCIAL INFORMATION

The accompanying financial information as of March 31, 2002 and 2001 is unaudited. In managements opinion, such information includes all normal recurring entries necessary to make the financial information not misleading.

NOTE 17.    REISSUED FINANCIAL STATEMENTS

The financial statements have been reissued to increase the disclosures detailed in the financial statements.

See Accompanying Notes and Independent Accountants’ Review Report.

F-31

No person is authorized to give any information or to make any representation other than those contained in this prospectus, and if made such information or representation must not be relied upon as having been given or authorized. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the securities offered by this prospectus or an offer to sell or a solicitation of an offer to buy the securities in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction.

The delivery of this prospectus shall not, under any circumstances, create any implication that there has been no change in our affairs since the date of this prospectus. However, in the event of a material change, this prospectus will be amended or supplemented accordingly.

NuTECH DIGITAL, INC.

5,930,030 Shares of Common Stock

Until ___________, 2002, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PROSPECTUS

July    , 2002

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24.    Indemnification of Directors and Officers.

The only statute, charter provision, bylaw, contract, or other arrangement under which any controlling person, director or officer of the Registrant is insured or indemnified in any manner against any liability which he may incur in his capacity as such, is as follows:

a.    Section 317 of the California General Corporation Law permits the indemnification of a corporation’s agents (which includes officers and directors) because the agent is a party (or he is threatened to be made a party) to any action or proceeding by reason of the fact that he is or was an agent of the corporation or because he is a party (or he is threatened to be made a party) to any action or proceeding brought by or on behalf of a corporation. If the agent is successful on the merits in defense of any action or proceeding, the corporation must indemnify the agent against expenses actually and reasonably incurred by the agent in such defense.

b.    Article V of the Registrant’s Articles of Incorporation provides that the liability of directors for monetary damages shall be eliminated to the fullest extent permissible under California law. This provision requires the Registrant to indemnify directors, as permitted by law, in excess of Section 317 of the California General Corporation Law.

c.    Article VI of the Registrant’s bylaws provides that the Registrant shall, to the maximum extent permitted by the California General Corporation Law, have power to indemnify each of its agents (which is defined to include any person who is or was a director, officer or employee of the Registrant) against expenses, judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding to the maximum extent permitted by law. In this regard, the Registrant has the power to advance to any officer or director expenses incurred in defending any such proceeding to the maximum extent permitted by law.

Item 25.    Other Expenses of Issuance and Distribution.

The estimated expenses of the offering, all of which are to be borne by the Registrant, are as follows:

SEC Filing Fee	$	915.42
Printing Expenses*		35,000.00
Accounting Fees and Expenses*		55,000.00
Legal Fees and Expenses*		100,000.00
Blue Sky Fees and Expenses*		7,500.00
Registrar and Transfer Agent Fee*		5,000.00
Miscellaneous*		1,500.00
Total*	$	204,915.42

* Estimated

Item 26.    Recent Sales of Unregistered Securities.

On July 31, 2000 the Registrant’s Board of Directors issued to Mr. Joseph Giarmo, the Registrant’s Vice-President and a director, 50 shares of the Registrant’s common stock as compensation for extraordinary services rendered by Mr. Giarmo to the Company, such services having a value of $250. The securities were issued in reliance upon the exemption provided in Section 4(2) of the Securities Act. These shares were issued prior to the stock split that the Registrant effected on May 4, 2001. After giving effect to the stock split, Mr. Giarmo owned 392,250 shares of the Registrant’s common stock.

II-1

On May 4, 2001 the Registrant’s Articles of Incorporation were amended to increase the authorized number of shares of our common stock from 2,000,000 to 100,000,000 and to split each share of outstanding common stock from one share into 7,905 shares.

On May 31, 2001, the Registrant issued 100,000 shares of its common stock to Elynor Kasper in exchange for the release of certain contract rights. The Registrant determined that the value of the contract rights was $3,000. On May 31, 2001, the Registrant also issued 350,000 shares of its common stock to Leora Kimble, in exchange for bookkeeping services rendered to the Registrant having a value of $10,500. Finally, on May 31, 2000, the Registrant issued 400,000 shares of its common stock to Saratoga Capital Corporation, its distributor in Asia, for services rendered to the Registrant having a value of $12,000. The Registrant determined that the value of the common stock on May 31, 2001 was $ .03 per share. The securities were issued in reliance upon the exemption provided in Section 4(2) of the Securities Act.

On June 1, 2001, the Registrant began a private offering of its securities, pursuant to the exemption provided in Section 4(2) of the Securities Act and Section 506 of Regulation D promulgated thereunder. In selling the Securities, the Registrant provided non-financial and financial statement information to the investors, did not offer or sell the securities by any form of general solicitation or general advertising, and advised each investor that the securities could not be resold without registration under the Securities Act or an exemption therefrom. These securities were sold with the assistance of broker-dealers to persons who represented that they were accredited investors, as that term is defined in Rule 501 of Regulation D. Each investor who purchased shares of common stock to 38 investors in this offering received a warrant to purchase a like number of additional shares. The unit price was $1.50 per share. The warrant exercise price is $3.00 per share. The warrants, if not exercised, will expire on November 1, 2002. The Registrant sold a total of 703,444 shares of its common stock in the offering. In addition to the shares sold, the Registrant issued a total of 208,142 shares of common stock to broker-dealers and advisors in connection with the offering. Broker-dealers were also paid a commission of 10%.

On September 13, 2001 the Registrant agreed to convert $100,000 of debt owed to Sarah and LeBron Barkstelle to common stock. The debt was converted at the rate of one share of common stock for each $1.00 converted. The securities were issued in reliance upon the exemption provided in Section 4(2) of the Securities Act.

On March 4, 2002, Urbach Kahn & Werlin, Inc. agreed to convert $80,000 of debt for services rendered to the Registrant to the Registrant’s common stock on the condition that (i) the Registrant file a registration statement which includes Urback Kahn & Werlin, Inc. as a shareholder selling 53,333 shares of common stock, and (ii) the Registration statement is declared effective by the Securities Exchange Commission before October 1, 2002. The conversion was made at $1.50 per share. The securities were issued in reliance upon the exemption provided in Section 4(2) of the Securities Act.

Also on March 4, 2002, Advanced Media Post, LLC agreed to convert $247,500 of debt for services rendered to the Registrant to the Registrant’s common stock on the condition that (i) the Registrant file a registration statement which includes Advanced Media Post, LLC as a shareholder selling 165,000 shares of common stock, and (ii) the registration statement is declared effective by the Securities Exchange Commission before October 1, 2002. The conversion was made at $1.50 per share. The securities were issued in reliance upon the exemption provided in Section 4(2) of the Securities Act.

II-2

Item 27.    Exhibits.

a.    The following Exhibits are filed as part of this Registration Statement pursuant to Item 601 of Regulation S-B:

Exhibit No.	Title*
3.1	Articles of Incorporation of NuTech, Digital, Inc., as amended.(1)
3.2	Bylaws of NuTech Digital, Inc., as amended on June 28, 2002.(2)
5.0	Legal Opinion from Pollet, Richardson & Patel.(1)
10.1	2001 NuTech Digital Inc. Equity Incentive Plan, as amended on June 28, 2002.(2)
10.2	Business Security Loan Agreement between NuTech Digital, Inc. and U.S. Bank N.A., dated as of March 20, 2002, including the Addendum and Amendment thereto.(2)
10.3	Letter of Intent between NuTech Digital, Inc. and Ritek Corp, dated as of August 6, 1996 (including Letter of Intent A).(1)
10.4	Promissory Note and Commercial Security Agreement memorializing Small Business Administration Loan between NuTech Digital, Inc. and Imperial Bank, SBA Department, dated as of July 12, 2000.(1)
10.5	Lease Agreement between Kathy Schreiber, Todd Lorber and Hiroko (“Lessor”) and NuTech Digital, Inc. (“Lessee”) for the premises located at 7900 Gloria Avenue, Los Angeles, CA, dated as of March 10, 2001.(1)
10.6	Joint Venture Agreement by and between NuTech Digital, Inc., and Joseph Anthony Giarmo.(1)
23.0	Consent of Moffitt & Company, P.C.(2)
23.1	Consent of Pollet, Richardson & Patel (included in Exhibit 5.0).(1)

(1) Previously filed.

(2) Filed herewith.

Item 28.    Undertakings.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel that the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes:

1.    To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i)   To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii)  To reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement;

(iii)  To include any additional or changed material information on the plan of distribution.

2.    That, for the purpose of determining any liability under the Securities Act of 1933, each post–effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

3.    To remove from registration by means of a post–effective amendment any of the securities being registered which remain unsold at the termination of the offering.

II-3

4.    Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

II-4

SIGNATURES

Pursuant to the requirements of the 1933 Securities Act, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and has duly caused this Pre-Effective Amendment No. 1 to Form SB-2 Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized, in the City of Van Nuys, State of California on the 12th day of July 2002.

NUTECH DIGITAL, INC., a California corporation
By:	/s/      LEE KASPER
	Lee Kasper, President, Chief Executive Officer, and Chief Financial Officer

Pursuant to the requirements of the 1933 Securities Act, this Pre-Effective Amendment No. 1 to Form SB-2Registration Statement has been signed by the following persons in the capacities with NuTech Digital, Inc. and on the dates indicated.

Name	Title	Date
/s/    LEE KASPER         Lee Kasper	President, Chief Executive Officer, Chief Financial Officer, Chairman of the Board of Directors	July 12, 2002
/S/    JOSEPH GIARMO         Joseph Giarmo	Vice President, Director	July 12, 2002
/s/     YEGIA ELI ARAMYAN         Yegia Eli Aramyan	Accountant, Director	July 12, 2002

II-5

3.1	Articles of Incorporation of NuTech, Digital, Inc., as amended.(1)
3.2	Bylaws of NuTech Digital, Inc., as amended on June 28, 2002.(2)
5.0	Legal Opinion from Pollet, Richardson & Patel.(1)
10.1	2001 NuTech Digital Inc. Equity Incentive Plan, as amended on June 28, 2002.(2)
10.2	Business Security Loan Agreement between NuTech Digital, Inc. and U.S. Bank N.A., dated as of March 20, 2002, including the Addendum and Amendment thereto.(2)
10.3	Letter of Intent between NuTech Digital, Inc. and Ritek Corp, dated as of August 6, 1996 (including Letter of Intent A).(1)
10.4	Promissory Note and Commercial Security Agreement memorializing Small Business Administration Loan between NuTech Digital, Inc. and Imperial Bank, SBA Department, dated as of July 12, 2000.(1)
10.5	Lease Agreement between Kathy Schreiber, Todd Lorber and Hiroko (“Lessor”) and NuTech Digital, Inc. (“Lessee”) for the premises located at 7900 Gloria Avenue, Los Angeles, CA, dated as of March 10, 2001.(1)
10.6	Joint Venture Agreement by and between NuTech Digital, Inc., and Joseph Anthony Giarmo.(1)
23.0	Consent of Moffitt & Company, P.C.(2)
23.1	Consent of Pollet, Richardson & Patel (included in Exhibit 5.0).(1)

(1) Previously filed.

(2) Filed herewith.

EX-3.2

EXHIBIT 3.2

BYLAWS

of

NUTECH DIGITAL, INC.

(a California Corporation)

as amended on June 28, 2002

ARTICLE I

OFFICES OF CORPORATION

Section 1.01    Principal Executive or Business Offices.    The Board of Directors shall fix the location of the principal executive office of the Corporation at any place within or outside the State of California. If the principal executive office is located outside California and the Corporation has one or more business offices in California, the Board of Directors shall fix and designate a principal business office in California.

Section 1.02    Other Offices.    Branch of subordinate offices may be established at any time and at any place by the Board of Directors.

ARTICLE II

MEETINGS OF STOCKHOLDERS OF CORPORATION

Section 2.01    Place of Meetings.    Meetings of stockholders shall be held at any place within or outside the State of California designated by the Board of Directors. In the absence of any such designation by the Board of Directors, stockholders’ meetings shall be held at the Corporation’s principal executive office.

Section 2.02    Annual Meeting.    The annual meeting of stockholders shall be held each year on a date and at a time designated by the Board of Directors. The date so designated shall be within five (5) months after the end of the Corporation’s fiscal year, and within fifteen (15) months after the last annual meeting of the stockholders has taken place. At each annual meeting, Directors shall be elected and any other proper business within the power and authority of the stockholders may be transacted.

Section 2.03    Special Meeting.    A special meeting of the stockholders may be called at any time by the Board of Directors, by the chairman of the Board, by the President or Vice President, or by one or more stockholders holding shares which in the aggregate are entitled to cast ten-percent (10%) or more of the votes at that meeting.

If a special meeting is called by anyone other than the Board of Directors, the person or persons calling the meeting shall make a request in writing, delivered personally or sent by registered mail, or by telegraphic or other facsimile transmission, to the chairman of the Board or the President, Vice President, or Secretary, specifying the time and date of the meeting (which shall be scheduled not less than thirty-five (35) nor more than sixty (60) days after receipt of the request) and the general nature of the business proposed to be transacted. Within twenty (20) days after receipt, the chairman or officer receiving such request shall cause notice to be given to the stockholders entitled to vote, in accordance with Sections 2.04 and 2.05 of this Article II, stating that a meeting will be held at the time and location requested by the person(s) calling the meeting, and stating the general nature of the business proposed to be transacted thereat. If notice is not given by the chairman or officer receiving the request within twenty (20) days after receipt thereof, the person or persons requesting the meeting may give the required notice. Nothing contained in this paragraph shall be construed as limiting, fixing, or affecting the date or time when a meeting of stockholders called by action of the Board of Directors may be held.

Section 2.04    Notice of Stockholders’ Meeting.    All notices of meetings of stockholders shall be sent or otherwise given in accordance with Section 2.05 of this Article II not fewer than ten (10) nor more than sixty (60) days before the date of the meeting. Stockholders entitled to notice shall be determined in accordance with Section 2.11 of this Article II. The notice shall specify the location, date and hour of the meeting; or (ii) in the case of an annual meeting, those matters which the Board of Directors, at the time of giving the notice, intend to present for action by the stockholders. In addition, if Directors are to be elected at said meeting, the notice shall include the names of all nominees whom the Board of Directors intends, at the time of the notice, to present for election.

The notice shall also state the general nature of any proposed action to be taken at the meeting to approve any of the following matters:

(i)  A transaction in which a Director has a financial interest, within the meaning of Section 310 of the California Corporations Code (“Code”);

(ii)  An amendment of the Articles of Incorporation of the Corporation under Section 902 of the Code;

(iii)  A reorganization of the Corporation under Section 1201 of the Code;

(iv)  A voluntary dissolution of the Corporation under Section 1900 of the Code; or

(v)  A distribution in dissolution with respect to the Corporation that requires approval of the outstanding shares under Section 2007 of the Code.

The notice of any meeting at which Directors are to be elected shall include the name of any nominee or nominees whom, at the time of the notice, management intends to present for election.

Section 2.05    Manner of Giving Notice: Affidavit of Notice.    Notice of any stockholders’ meeting shall be given either personally or by first-class mail, or telegraphic or other written communication, charges prepaid, addressed to the stockholders at the address appearing on the Corporation’s books or given by the stockholder to the Corporation for the purpose of such notice. If no address appears on the Corporation’s books or has been given as specified herein, notice shall be either, (i) sent by first-class mail addressed to the stockholder at the Corporation’s principal executive office; or (ii) published at least once in a newspaper of general circulation in the county where the Corporation’s principal executive office is located. Notice is deemed to have been given at the time when delivered personally, or deposited in the mail or sent by other means of written communication.

If any notice or report mailed to a stockholder at the address appearing on the Corporation’s books is returned, marked so as to indicate that the United States Postal Service is unable to deliver the document to the stockholder at that address, all future notices or reports shall be deemed to have been duly given without further mailing if the Corporation holds the document available for the stockholder on written demand at the Corporation’s principal executive office for a period of one (1) year from the date the notice or document was given to all other stockholders.

An affidavit of the mailing, or other authorized means of giving notice or delivering a document, regarding notice of stockholders’ meeting, or other document sent to stockholders, may be executed by the Corporation’s Secretary, assistant Secretary, or transfer agent, and shall be filed and maintained in the minute book of the Corporation.

Section 2.06    Quorum.    The presence in person or by proxy of the holders of a majority of the shares entitled to vote at any meeting of the stockholders shall constitute the quorum necessary for the transaction of business. The stockholders present at a duly called or held meeting at which the quorum is present may continue to do business until adjournment, notwithstanding the withdrawal from the meeting of certain stockholders which leave less than a quorum remaining, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.

Section 2.07    Meeting Adjournment: Notice.    Any stockholders’ meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of a majority of the shares represented at the meeting, either in person or by proxy, but in the absence of a quorum, no other business may be transacted at that meeting, except as provided in Section 2.06 of this Article II.

When any meeting of the stockholders, either annual or special, is adjourned to another time or place, notice of such need not be given if the time and place are announced at the meeting at which the adjournment is taken, unless anew record date for the adjourned meeting is fixed, or unless the adjournment is for more than forty–five (45) days from the date set for the original meeting, in which case the Board of Directors shall set a new record date. Notice of any such adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Sections 2.04 and 2.05 of this Article II. At any adjourned meeting, the stockholders may transact any business which might have been transacted at the original meeting.

Section 2.08    Voting.    The stockholders entitled to vote at any meeting of stockholders with the provisions of Section 2.11 of this Article II, subject to the provisions of Sections 702 through 704 of the California Corporations Code (relating to voting shares held by a fiduciary, in the name of the Corporation, or in joint ownership). The stockholders’ vote may be by a voice vote or by ballot; provided, however, that any election for Directors must be by ballot if demanded by any stockholder before the voting has begun. On any matter other than elections of Directors, any stockholder may vote part of his shares in favor of the proposal and refrain from voting his remaining shares or vote them against the proposal, but, if the stockholder fails to specify the number of shares which the stockholder is voting affirmatively, it will be conclusively presumed that the stockholder’s approving vote is cast with respect to all shares which the stockholder is entitled to vote. If a quorum is present (or if a quorum had been present earlier at the meeting but no longer exists because some stockholders have withdrawn), the affirmative vote of the majority of the shares represented and voting, provided such shares voting affirmatively also constitute a majority of the number of shares required for a quorum, shall constitute the act of the stockholders unless the vote of a greater number of those voting by classes is required by law or by the Articles of Incorporation of the Corporation.

At the stockholders’ meeting at which Directors are to be elected, no stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a number of votes greater than the number of votes which the stockholder normally would be entitled to cast), unless the candidates’ names have been placed in nomination before commencement of the voting and a stockholder has given notice at the meeting, before the voting has begun, of the stockholder’s intention to cumulate votes. If any stockholder has given such a notice, then all stockholders entitled to vote may cumulate their votes for candidates in nomination, and may give one candidate a number of votes equal to the number of Directors to be elected multiplied by the number of votes to which that stockholder’s shares are entitled, or distribute the stockholder’s votes on the same principle among any or all the candidates, as the stockholder believes proper. The candidates receiving the highest number of votes, up to the number of Directors to be elected, shall be elected.

Section 2.09    Waiver of Notice or Consent by Absent Stockholder.    The transactions of any meeting of stockholders, either annual or special, however called and noticed and wherever held, shall be as valid as though they were had at a meeting duly held after regular call and notice, if a quorum be present either at such meeting in person or by proxy, and if each person entitled to vote who was not present in person or by proxy, either before or after the meeting, signs a written waiver of notice or consent to a holding of a meeting, or an approval of the minutes of the meeting. The waiver of notice or consent need not specify either the business to be transacted or the purpose of any annual or special meeting of the stockholders, except that if action is taken or proposed to be taken for approval of any of those matters specified in Section 601(f) of the California Corporations Code, the waiver of notice or consent is required to state the general nature of the action or proposed action. All waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

A stockholder’s attendance at a meeting also constitutes a waiver of notice of that meeting, unless the stockholder at the beginning of the meeting objects to the transaction of any business on the ground that the meeting was not lawfully called or convened. In addition, attendance at a meeting does not constitute a waiver of any rights to object to consideration of matters required by laws to be included in the notice of the meeting which were not so included, if that objection is expressly made at the meeting.

Section 2.10      Stockholder Action by Written Consent Without a Meeting.    Any action that could be taken at an annual or special meeting of the stockholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes which would be necessary to authorize or take that action at a meeting at which all shares entitled to vote on that action were present and voted.

Directors may be elected by written consent of the stockholders without a meeting only if the written consent of all outstanding shares entitled to vote are obtained, except that vacancies on the Board of Directors (other than vacancies created by removal) not filled by the Board of Directors itself may be filled by the written consent of the holders of a majority of the outstanding shares entitled to vote.

All consents shall be filed with the Secretary of the Corporation and shall be maintained in the corporate records. Any stockholder or other authorized person who has given a written consent may revoke it by a writing received by the Secretary of the Corporation before written consents of the number of shares required to authorize the proposed action have been filed with the Secretary.

Unless the consents of all stockholders entitled to vote have not been solicited in writing, prompt notice shall be given of any corporate action approved by stockholders

without a meeting by less than unanimous consent, to those stockholders entitled to vote who have not consented in writing. As to approvals required by California Corporation Code, Section 310 (transactions in which a Director has a financial interest), Section 317 (indemnification of corporate agents), Section 1201 (corporate reorganization),or Section 2007 (certain distributions or dissolution), notice of the approval shall be given at least ten (10) days before the consummation of any action authorized by the approval. Notice shall be given in the manner specified in Section 2.05 of this Article II.

Section 2.11    Record Date for Stockholder Notice, Voting, and Giving Consent.

(a)  For purposes of determining the stockholders entitled to receive notice of a vote at a stockholders’ meeting or give written consent to corporate action without a meeting, the Board of Directors may fix in advance a record date that is not more than sixty (60) or less than ten (10) days before the date of a stockholders’ meeting, or not more than sixty (60) days before any other action.

(b)  If no record date is fixed:

(i)  The record date for determining stockholders entitled to receive notice of and vote at a stockholders’ meeting shall be the business day next preceding the day on which notice is given, or if notice is waived as provided in Section 2.09 of this Article II, the business day next preceding the day on which the meeting is held;

(ii)  The record date for determining stockholders entitled to give consent to corporate action in writing without a meeting, if no prior action has been taken by the Board of Directors, shall be the day on which the first written consent is given; and

(iii)  The record date for determining stockholders for any other purpose shall be as set forth in Section 8.01 of Article VIII of these Bylaws.

(c)  A determination of stockholders of record entitled to receive notice of and vote at a stockholders’ meeting shall apply to any adjournment of the meeting unless the Board of Directors fixes a new record date for the adjourned meeting. However, the Board of Directors shall fix a new record date if the adjournment is to a date more than forty-five (45) days after the date set for the original meeting.

(d)  Only stockholders of record on the Corporation’s books at the close of business on the record date shall be entitled to any of the notice and voting rights listed in subsection (a) of this Section 2.11, notwithstanding any transfer of shares on the Corporation’s books after the record date except as otherwise required by law.

Section 2.12    Proxies.    Every stockholder entitled to vote for Directors or on any other matter shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by that stockholder and filed with the Secretary of the Corporation. A proxy shall be deemed signed if the stockholder’s name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission, or otherwise) by the stockholder or the stockholder’s attorney in fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless, (i) revoked by the person executing it, before the vote pursuant to that proxy, by a writing delivered to the Corporation stating that the proxy is revoked, or by attendance at the meeting and voting in person by the stockholder executing the proxy or by a subsequent proxy executed by the same stockholder and presented at the meeting; or (ii) written notice of the death or incapacity of the maker of that proxy is received by the Corporation before the vote pursuant to that proxy is counted; provided, however, that no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy, unless otherwise provided in the proxy. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Sections 705(e) and 705(f) of the California Corporations Code.

Section 2.13    Inspectors of Election.    Before any meeting of stockholders, the Board of Directors may appoint any persons other than nominees for office to act as inspectors of election at the meeting or its adjournment. If no inspectors of election are so appointed, the chairman of the meeting may, and on the request of any stockholder or a stockholder’s proxy shall, appoint inspectors of election at the meeting. The number of inspectors shall either be one (1) or three (3). If inspectors are appointed at a meeting on the request of one or more stockholders or proxies, the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If a person appointed as inspector fails to appear or fails or refuses to act, the chairman of the meeting may, and upon the request of any stockholder or a stockholder’s proxy shall, appoint a different person to fill the vacancy.

An inspector shall: (i) determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies; (ii) receive votes, ballots, or consents; (iii) hear and determine all challenges and questions in any way arising in connection with the right to vote; (vi) count and tabulate all votes or consents; (v) determine when the polls shall close; (vi) determine the result; and (vii) do any other acts which may be necessary and proper to conduct the election or vote in a manner fair to all stockholders.

ARTICLES III

BOARD OF DIRECTORS OF CORPORATION

Section 3.01    Powers.    Subject to the provisions of the California General Corporations Law and any limitations in the Articles of Incorporation of the Corporation and these Bylaws relating to actions required to be approved by the stockholders or by the outstanding shares, the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors.

Section 3.02    Number of Directors.    The authorized number of Directors shall be no less that three and no more than five until changed by a duly adopted amendment to the Articles of Incorporation or by an amendment to these Bylaws adopted by the vote or written consent of a majority of the outstanding shares entitled to vote.

Section 3.03    Election and Term of Office of Directors.    Directors shall be elected at each annual meeting of the stockholders to hold office until the next annual meeting. Each Director, including a Director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified.

No reduction of the authorized number of Directors shall have the effect of removing any Director before that Director’s term of office expires.

Section 3.04    Vacancies.    A vacancy on the Board of Directors shall be deemed to exist, (i) if a Director dies, resigns, or is removed by the stockholders or an appropriate court, as provided in Sections 303 or 304 of the California Corporations Code; (ii) if the Board of Directors declares vacant the office of a Director who has been convicted of a felony or declared of unsound mind by an order of court; (iii) if the authorized number of Directors is increased; or (iv) if at any stockholders’ meeting at which one or more Directors are elected the stockholders fail to elect the full authorized number of Directors to be voted for at that meeting.

Any Director’s resignation shall be effective on giving written notice of such to the chairman of the Board, the President, the Secretary, or the Board of Directors, unless said notice specifies a later effective date. If the resignation is effective at a future time, the Board of Directors may elect a successor to take office when the resignation becomes effective.

Except for a vacancy caused by the removal of a Director, vacancies on the Board of Directors may be filled by a majority of the Directors then in office, whether or not they constitute a quorum, or by a sole remaining Director. A vacancy on the Board of Directors caused by the removal of a Director may be filled only by the stockholders, except that a

vacancy created when the Board of Directors declares the office of a Director vacant as provided in clause (ii) of the first paragraph of this Section 3.04 may be filled by the Board of Directors.

The stockholders may elect a Director at any time to fill a vacancy not filled by the Board of Directors.

The term of office of a Director elected to fill a vacancy shall run until the next annual meeting of the stockholders, and such a Director shall hold office until a successor is elected and qualified.

Section 3.05    Location of Meetings; Telephone Meetings.    Regular meetings of the Board of Directors may be held at any location within or outside the State of California that has been designated from time to time by the Board of Directors. In the absence of such a designation, regular meetings shall be held at the principal executive office of the Corporation. Special meetings of the Board of Directors shall be held at any location, within or outside the State of California designated in the notice of the meeting, or if the notice does not state a location, or if there is no notice, at the principal executive office of the Corporation. Any meeting, regular or special, may be held by telephone conference or similar communications equipment, provided that all Directors participating can hear and communicate with one another.

Section 3.06    Annual Directors’ Meeting.    Immediately after each annual stockholders meeting, the Board of Directors shall hold a regular meeting at the same location, or at any other location that has been designated by the Board of Directors, to consider matters of organization, election of officers, and other business as desired. Notice of this meeting shall not be required unless some location other than that of the annual stockholders’ meeting has been designated.

Section 3.07    Other Regular Meetings.    Other regular meetings of the Board of Directors shall be held without call at times to be fixed by the Board of Directors. Such regular meetings may be held without notice.

Section 3.08    Special Meetings.    Special meetings of the Board of Directors may be called for any purpose or purposes at anytime by the chairman of the Board, the President, any Vice President, the Secretary, or any two (2) Directors.

Special meetings shall be held on four (4) days’ notice by mail or forty-eight (48) hours’ notice delivered personally or by telephone or telegraph. Oral notice given personally or by telephone may be transmitted either to the Director or to a person at the Director’s office who can reasonably be expected to communicate such notice promptly to the Director. Written notice, if used, shall be addressed to each Director at the address

shown on the Corporation’s records. The notice need not specify the purpose of the meeting, nor its location if the meeting is to be held at the principal executive office of the Corporation.

Section 3.09    Quorum.    A majority of the authorized number of Directors shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 3.11 of this Article III. Every act or decision done or made by a majority of the Directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Directors, subject to the provisions of Section 310 of the California Corporations Code (as to approval of contracts or transactions in which a Director has a direct or indirect material financial interest), and Section 317(e) (as to indemnification of Directors). A meeting at which a quorum is initially present may continue to transact business, notwithstanding the withdrawal of Directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

Section 3.10    Waiver of Notice.    Notice of a meeting, although otherwise required, need not be given to any Director who, (i) either before or after the meeting signs a waiver of notice or a consent to holding the meeting without being given notice; (ii) signs an approval of the minutes of the meeting; or (iii) attends the meeting without protesting the lack of notice before or at beginning of the meeting. Waivers of notice or consent need not specify the purpose of the meeting. All waivers, consents, and approvals of the minutes shall be filed in the corporate records or made a part of the minutes of the meeting.

Section 3.11    Adjournment to Another Time or Location.    Whether or not a quorum is present, a majority of the Directors present may adjourn any meeting to another time or location.

Section 3.12    Notice of Adjourned Meeting.    Notice of the time and location of resuming a meeting which has been adjourned need not be given unless the adjournment is for more than twenty-four (24) hours, in which case notice shall be given, before the time set for resuming the adjourned meeting, to the Directors who were not present at the time of the adjournment. Notice need not be given in any case to Directors who were present at the time of adjournment.

Section 3.13    Action Without a Meeting.    Any action required or permitted to be taken by the Board of Directors may be taken without a meeting, if all members of the Board of Directors shall individually or collectively consent in writing to that action. Any action by written consent shall have the same force and effect as a unanimous vote of the Board of Directors. All written consents shall be filed with the minutes of the proceedings of the Board of Directors.

Section 3.14    Fees and Compensation of Directors.    Directors and members of committees of the Board of Directors may be compensated for their services, and shall be reimbursed for expenses, as fixed or determined by resolution of the Board of Directors. This Section 3.14 shall not be construed to preclude any Director from serving the Corporation in any other capacity, as an officer, agent, employee, or otherwise, and receiving compensation for those services.

ARTICLE IV

COMMITTEES OF CORPORATION

Section 4.01    Executive and Other Committees of the Board.    The Board of Directors may, by resolution adopted by a majority of the authorized number of Directors, designate an executive committee or one or more other committees, each consisting of one or more Directors. The Board may designate one or more Directors as alternate members of any committee, to replace any absent member at a committee meeting. The appointment of committee members or alternate members requires the vote of a majority of the authorized number of Directors. A committee may be granted any or all of the powers and authority of the Board of Directors, to the extent provided in the resolution of the Board of Directors establishing the committee, except with respect to:

(a)  Approving any action for which the California Corporations Code also requires the approval of the stockholders or of the outstanding shares:

(b)  Filling vacancies on the Board of Directors or any committee of the Board;

(c)  Fixing Directors’ compensation for serving on the Board or a committee of the Board of Directors;

(d)  Adopting, amending, or repealing bylaws;

(e)  Amendment or repealing any resolution of the Board of Directors which by its express terms is not so amendable or repealable;

(f) Making distributions to stockholders, except at a rate or in a periodic amount or within a price range determined by the Board of Directors; or

(g) Appointing other committees of the Board or their members.

Section 4.02    Meetings and Action of Committees.    Meetings and action of committees shall be governed by, and held and taken in accordance with, provisions of these Bylaws applicable to meetings and actions of the Board of Directors, as provided in

Section 3.05 and Sections 3.07 through 3.13 of Article III of these Bylaws, as to the following matters; place of meetings (Section 3.05); regular meetings (Section 3.07); special meetings and notice (Section 3.08); quorum (Section 3.09); waiver of notice (Section 3.10); adjournment (Section 3.11); notice of adjournment (Section 3.12); and action without meeting (Section 3.13), with such changes in the context of those sections as are necessary to substitute the committee and its members for the Board of Directors and its members, except that (i) the time of regular meetings of committees may be determined either by resolution of the Board of Directors or by resolution of the committee; (ii) special meetings of committees may also be called by resolution of the Board of Directors which may adopt rules for the governance of any committee not inconsistent with the provisions of these Bylaws.

ARTICLE V

EXECUTIVE OFFICERS OF CORPORATION

Section 5.01    Officers.    The officers of the Corporation shall be a President, a Secretary, and a Chief Financial Officer. The Corporation may also have, at the discretion of the Board of Directors, a chairman of the Board, one or more Vice Presidents, one or more assistant secretaries, one or more assistant Treasurers, and such other officers as may be appointed in accordance with the provisions of Section 5.03 of this Article V. Any number of offices may be held by the same person.

Section 5.02    Election of Officers.    The officers of the Corporation, except for subordinate officers appointed in accordance with the provisions of Section 5.03 or Section 5.05 of this Article V, shall be chosen by the Board of Directors, and shall serve at the pleasure of the Board of Directors.

Section 5.03    Subordinate Officers.    The Board of Directors may appoint, and may empower the President to appoint other officers as required by the business of the Corporation, whose duties shall be provided in these Bylaws, or as determined from time to time by the Board of Directors or the President.

Section 5.04    Removal and Resignation of Officers.    Any officer chosen by the Board of Directors may be removed at any time, with or without cause or notice, by the Board of Directors. Subordinate officers appointed by persons other than the Board under Section 5.03 of this Article V may be removed at any time, with or without cause or notice, by the Board of Directors or by the officer by whom appointed. Officers may be employed for a specified term under a contract of employment if authorized by the Board of Directors. Such officers may be removed from office at any time under this Section 5.04, and shall have no claim against the Corporation or individual officers or members of the

Board of Directors because of the removal except any right to monetary compensation to which the officer may be entitled under the contract of employment.

Any officer may resign at any time by giving written notice to the Corporation. Resignations shall take effect on the date of receipt of such written notice, unless a later time is specified in the notice. Unless otherwise specified in the notice, acceptance of the resignation is not necessary to make it effective. Any acceptance of resignation is without prejudice to the rights, if any, of the Corporation to monetary damages under any contract of employment to which the officer is a party.

Section 5.05    Vacancies in Office.    A vacancy in any office resulting from an officer’s death, resignation, removal, disqualification, or from any other cause shall be filled in the manner prescribed in these Bylaws for regular election or appointment to that office.

Section 5.06    Chairman of the Board.    The Board of Directors shall elect a chairman, who shall preside, if present, at Board meetings and shall exercise and perform such other powers and duties as may be assigned from time to time by the Board of Directors. If there is no President, the chairman of the Board shall in addition be the President of the Corporation, and shall have the powers and duties as set forth in Section 5.07 of this Article V.

Section 5.07    President (Chief Executive Officer; Chief Operating Officer).    The President shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and affairs of the Corporation and its officers, and shall have such other functions, authority and duties as may be prescribed by the Board of Directors. These powers and duties of management include, but are not limited to, all the general powers and duties of management usually vested in the office of President. The Board of Directors may, in its discretion, divide and allocate the functions, authority and duties of the President amongst one or more of the following positions: President, Chief Executive Officer and/or Chief Operating Officer. If the Board of Directors, in its discretion, divides and allocates the authority of the President amongst a Chief Executive Officer and Chief Operating Officer without designating either of such positions as President, then the Chief Executive Officer shall also be deemed the President of this Corporation.

Section 5.08    Vice President.    If desired, one or more Vice Presidents may be chosen by the Board of Directors in accordance with the provisions for electing officers set forth in Section 5.02 of this Article V. In the absence or disability of the President, the President’s duties and responsibilities shall be carried out by the highest ranking available Vice President if Vice Presidents are ranked, or if not, by a Vice President designated by the Board of Directors. When so acting, a Vice President shall have all the powers of and

be subject to all the restrictions on the President. Vice Presidents of the Corporation shall have such other powers and perform such other duties as prescribed from time to time by the Board of Directors, these Bylaws, or the President (or chairman of the Board if there is not a President).

Section 5.09    Secretary.

(a)  Minutes.    The Secretary shall be present at all stockholders’ meetings and all Board meetings and shall take the minutes of such meetings. If the Secretary is unable to be present, at such meeting the presiding officer of the meeting shall designate another person to take the minutes of the meeting.

The Secretary shall keep or cause to be kept, at the principal executive office or such other place as designated by the Board of Directors, a book of minutes of all meetings and actions of the stockholders, of the Board of Directors, and of committees of the Board of Directors. The minutes of each meeting shall state the time and place the meeting was held; whether it was regular or special, if special, how it was called or authorized; the names of Directors present at Board or committee meetings; the number of shares present or represented at stockholders’ meetings; and an accurate account of the proceedings.

(b)  Record of Stockholders.    The Secretary shall keep, or cause to be kept, at the principal executive office or at the office of the Corporation’s transfer agent or registrar, a record or duplicate record of stockholders. This record shall show the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of share certificates issued to each stockholder, and the number and date of cancellation of any certificates surrendered for cancellation.

(c)  Notice of Meeting.    The Secretary shall give notice, or cause notice to be given, of all stockholders’ meetings, Board of Directors meetings, and meetings of committees of the Board of Directors for which notice is required by statute or by these Bylaws. If the Secretary or other person authorized by the Secretary to give notice fails to act, notice of any meeting may be given by any other officer of the Corporation.

(d)  Other Duties.    The Secretary shall keep the seal of the Corporation, if any, in safe custody. The Secretary shall have such other powers and perform such other duties as prescribed by the Board of Directors or by these Bylaws.

Section 5.10    Chief Financial Officer (Treasurer).    The Chief Financial Officer, which shall be synonymous with the position of Treasurer, shall keep or cause to be kept adequate and correct books and records of accounts of the properties and business transactions of the Corporation, including accounts of its assets, liabilities, receipts,

disbursements, gains, losses, capital, retained earnings, and shares. The books of account shall be open to inspection by any Director at all reasonable times.

The Chief Financial Officer shall (i) deposit corporate funds and other valuables in the Corporation’s name and to its credit with depositaries designated by the Board of Directors; (ii) make disbursements of corporate funds as authorized by the Board of Directors; (iii) render a statement of the Corporation’s financial condition and an account of all transactions conducted as Chief Financial Officer whenever requested by the President or the Board of Directors; (iv) have other powers and perform other duties as prescribed by the Board of Directors or these Bylaws.

ARTICLE VI

INDEMNIFICATION OF DIRECTORS,

OFFICERS, EMPLOYEES AND OTHER CORPORATE AGENTS

Section 6.01    Indemnification of Directors, Officers, Employees, and Other Agents.    The Corporation shall, to the maximum extent permitted by the California General Corporation Law, have power to indemnify each of its agents against expenses, judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding arising by reason of the fact any person is or was an agent of the Corporation, and shall have power to advance to each such agent expenses incurred in defending any such proceeding to the maximum extent permitted by law. For purposes of this Article VI, an “agent” of the Corporation includes any person who is or was a Director, officer, employee, or other agent of the Corporation, or is or was serving at the request of the Corporation as a Director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprises, or was a Director, officer, employee, or agent of a corporation which was a predecessor corporation of the Corporation or of another enterprise at the request of such predecessor corporation of the Corporation or of another enterprise at the request of such predecessor corporation.

ARTICLE VII

RECORDS AND REPORTS

Section 7.01    Maintenance of Stockholder Record and Inspection by Stockholders.    The Corporation shall keep at its principal executive office, or at the office of its transfer agent or registrar, as determined by resolution of the Board of Directors, a record of its stockholders and the number and class of shares held by each stockholder.

A stockholder or stockholders holding at least five percent (5%) in the aggregate of the outstanding voting shares of the Corporation have the right to do either or both the following:

(a)  Inspect and copy the records of stockholders’ names and addresses and stockholdings during usual business hours, on five (5) days’ prior written demand on the Corporation, or

(b)  Obtain from the Corporation’s transfer agent, on written demand and tender of the transfer agent’s usual charges for this service, a list of the names and addresses of stockholders who are entitled to vote for the election of Directors, and their stockholdings, as of the most recent record date for which a list has been compiled or as of a specified date later than the date of demand. This list shall be made available within five (5) days after the date of demand, or the specified later date as of which the list is to be compiled. The record of stockholders shall also be opened to inspection on the written demand of any stockholder or holder of a voting trust certificate, at any time during usual business hours, for a purpose reasonably related to the holder’s interests as a stockholder or holder of a voting trust certificate. Any inspection and copying under this Section 7.01 may be made in person or by an agent or attorney of the stockholder or holder of a voting trust certificate making the demand.

Section 7.02    Maintenance and Inspection of Bylaws.    The Corporation shall keep at its principal executive office, or if its principal executive office is not in the State of California, at its principal business office in the state, the original or a copy of these Bylaws as amended to date, which shall be open to inspection by the stockholders at all reasonable times during office hours. If the principal executive office of the Corporation is outside the State of California and the Corporation has no principal business office in the state, the Secretary shall, upon the written request of any stockholder, furnish to that stockholder a copy of these Bylaws as amended to date.

Section 7.03    Maintenance and Inspection of Minutes and Accounting Records.    The minutes of proceedings of the stockholders, Board of Directors, and committees of the Board, and the accounting books and records shall be kept at the principal executive office of the Corporation, or at such other place or places as designated by the Board of Directors. The minutes shall be kept in written form, and the accounting books and records shall be kept either in written form or in any other form capable of being converted into written form. The minutes and accounting books and records shall be open to inspection upon the written demand of any stockholder or holder of a voting trust certificate reasonably related to the holder’s interests as a stockholder or holder of a voting trust certificate. The inspection may be made in person or by an agent or attorney, and shall include the right to copy and make extracts. These rights of inspection shall extend to the records of each subsidiary of the Corporation.

Section 7.04    Inspection by Directors.    Every Director shall have the absolute right at any reasonable time to inspect all books, records, and documents of every kind and the physical properties of the Corporation and each of its subsidiary corporations. This inspection by a Director may be made in person or by an agent or attorney and the right of inspection includes the right to copy and make extracts of documents.

Section 7.05    Annual Report to Stockholders.    Inasmuch as, and for as long as, there are fewer than 100 stockholders, the requirement of an annual report to stockholders referred to in Section 1501 of the California Corporations Code is expressly waived. However, nothing in this provision shall be interpreted as prohibiting the Board of Directors from issuing annual or other periodic reports to the stockholders, as the Board considers appropriate.

Section 7.06    Financial Statements.    The Corporation shall keep a copy of each annual financial statement, quarterly or other periodic income statement, and accompanying balance sheets prepared by the Corporation on file in the Corporation’s principal executive office for twelve (12) months; these documents shall be exhibited at all reasonable times, or copies provided, to any stockholder on written demand therefor.

If no annual report for the last fiscal year has been sent to stockholders, on written request of any stockholder made more than one hundred twenty (120) days after the close of the fiscal year the Corporation shall deliver or mail to the stockholder, within thirty (30) days after receipt of the request, a balance sheet as of the end of that fiscal year and an income statement and statement of changes in financial position for that fiscal year.

A stockholder or stockholders holding five percent (5%) or more of the outstanding shares of any class of stock of the Corporation may request in writing an income statement for the most recent three-month, six-month, or nine-month period (ending more than thirty (30) days before the date of the request) of the current fiscal year, and a balance sheet of the Corporation as of the end of that period. If such documents are not already prepared, the Chief Financial Officer shall cause them to be prepared and shall deliver the documents personally or mail them to the requesting stockholders within thirty (30) days after receipt of the request. A balance sheet, income statement, and statement of changes in financial position for the last fiscal year shall also be included, unless the Corporation has sent the stockholders an annual report for the last fiscal year.

Quarterly income statements and balance sheets referred to in this Section 7.06 shall be accompanied by the report, if any, of the independent accountants engaged by the Corporation or the certificate of an authorized corporate officer stating that the financial statements were prepared without audit from the Corporation’s books and records.

Section 7.07    Annual Statement of General Information.

(a)  Every year, during the calendar month in which the original Articles of Incorporation of the Corporation were filed with the California Secretary of State, or during the preceding five (5) calendar months, the Corporation shall file a statement with the Secretary of State on the prescribed form, setting forth the authorized number of Directors; the names and complete business or residence addresses of all incumbent Directors; the name and complete business or residence addresses of the President, the Secretary, and the Chief Financial Officer; the street address of the Corporation’s principal executive office or principal business office in this state; a statement of the general type of business constituting the principal business activity of the Corporation; and a designation of the agent of the Corporation for the purpose of service of process, all in compliance with Section 1502 of the California Corporations Code.

(b)  Notwithstanding the provisions of paragraph (a) of this Section 7.07, if there has been no change in the formation contained in the Corporation’s last annual statement on file in the California Secretary of State’s office, the Corporation may, in lieu of filing the annual statement described in paragraph (a) of this Section 7.07, advise the Secretary of State, on the appropriate form, that no changes in the required information have occurred during the applicable period.

ARTICLE VIII

GENERAL CORPORATE MATTERS

Section 8.01    Record Date for Purposes Other Than Notice and Voting.    For purposes of determining the stockholders entitled to receive payment of dividends or other distributions or allotment of rights, or entitled to exercise any rights in respect of any other lawful action (other than voting at and receiving notice of stockholders’ meetings and giving written consent of the stockholders without a meeting), the Board of Directors may fix in advance a record date which shall not be more than sixty (60) days before the date of the dividend payment, distribution, allotment, or other action. If a record date is so fixed, only stockholders of record at the close of business on that date shall be entitled to receive the dividend, distribution, or allotment of rights, or to exercise any other rights, as the case may be, notwithstanding any transfer of shares on the Corporation’s books after the record date, except as otherwise provided by law.

If the Board of Directors does not fix a record date in advance, the record date shall be at the close of business on the later of, (i) the day on which the Board of Directors adopts the applicable resolution or, (ii) the sixtieth (60th) day before the date of the dividend payment, distribution, allotment of rights, or other action.

Section 8.02    Authorized Signatories for Check.    All checks, drafts, other orders for payment of money, notes, or other evidences of indebtedness issued in the name of or payable to the Corporation shall be signed or endorsed by such person or persons in such manner authorized from time to time by resolution of the Board of Directors.

Section 8.03    Executing Corporate Contracts and Instruments.    Except as otherwise provided in the Articles of Incorporation of the Corporation or in these Bylaws, the Board of Directors by resolution may authorize any officer, officers, agents, or agents to enter into any contract or to execute any instrument in the name of and on behalf of the Corporation. This authority may be general or it may be confined to one or more specific matters. No officer, agent, employee, or other person purporting to act on behalf of the Corporation shall have any power or authority to bind the Corporation in any way, to pledge the Corporation’s credit, or to render the corporation liable for any purpose or in any amount, unless that person was acting with authority duly granted by the Board of Directors as provided in these Bylaws, or unless an unauthorized act was later ratified by the corporation.

Section 8.04    Certificates for Shares.    A certificate or certificates for shares of the capital stock of the Corporation shall be issued to each stockholder when any of the shares are fully paid. All certificates shall certify the number of shares and the class or series of shares represented by the certificate. All certificates shall be signed in the name of the Corporation by, (i) either the chairman of the Board of Directors, the Vice chairman of the Board of Directors, the President, or any Vice President, and (ii) either the President, any assistant Treasurer, the Secretary, or any assistant Secretary.

Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed on a certificate shall cease to be that officer, transfer agent, or registrar before that certificate is issued, the certificate may be issued by the Corporation with the same effect as if that person were an officer, transfer agent, or registrar at the date of issue.

Section 8.05    Lost Certificates.    Except as provided in this Section 8.05, no new certificates for shares shall be issued to replace an old certificate unless the old certificate is surrendered to the Corporation for cancellation at the same time. If share certificates or certificates for any other security have been lost, stolen, or destroyed, the Board of Directors may authorize the issuance of replacement certificates on terms and conditions as required by the Board of Directors, which may include a requirement that the owner give the Corporation a bond (or other adequate security) sufficient to indemnify the Corporation against any claim which may be made against it (including any expense or liability) on account of the alleged loss, theft, or destruction of the old certificate or the issuance of the replacement certificate.

Section 8.06    Shares of Other Corporations; How Voted.    Shares of other corporations standing in the name of the Corporation shall be voted by one of the following persons, listed in order of preference: (i) chairman of the Board, or person designated by the chairman of the Board; (ii) President, or person designated by the President; (iii) first Vice President, or person designated by the first Vice President; (iv) other person designated by the Board of Directors. The authority to vote shares granted by this Section 8.06 includes the authority to execute a proxy in the name of the Corporation for purposes of voting the shares.

Section 8.07    Reimbursement of Corporation if Payment Not Tax Deductible.    If all or part of the compensation, including expenses, paid by the Corporation to a Director, officer, employee, or agent is finally determined not to be allowable to the Corporation as a federal or state income tax deduction, the Director, officer, employee, or agent to whom the payment was made shall repay to the Corporation the amount disallowed. The Board of Directors shall enforce repayment of each such amount disallowed by the taxing authorities.

Section 8.08    Construction and Definitions.    Unless the context requires otherwise, the general provisions, rules of construction, and definitions in Sections 100 through 195 of the California Corporations Code shall govern the construction of these Bylaws. Without limiting the generality of this Section 8.08, the singular, and the term “person” includes both a corporation and a natural person.

ARTICLE IX

AMENDMENTS TO BYLAWS

Section 9.01    Amendment by Board of Directors or Stockholders.    Except as otherwise required by law or by the Articles of Incorporation of the Corporation, these Bylaws may be amended or repealed, and new Bylaws may be adopted, by the Board of Directors or by the holders of a majority of the outstanding shares entitled to vote.

CERTIFICATE OF SECRETARY

I, the undersigned, do hereby certify:

1.  That I am the duly elected and acting Secretary of NuTech Digital, Inc., a California corporation; and

2.  That the foregoing Bylaws comprising twenty (20) pages constitute the Bylaws of the Corporation, as amended, and were duly adopted by the Board of Directors and shareholders on June 28, 2002.

IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of said Corporation on June 28, 2002.

/s/                                  

Joseph Giarmo

Secretary

EX-10.1

EXHIBIT 10.1

NuTECH DIGITAL, INC.

2001 EQUITY INCENTIVE PLAN

As Amended on June 28, 2002

1.    NAME.

The name of the plan is “NuTech Digital, Inc. 2001 Equity Incentive Plan”.

2.    PURPOSE.

The purpose of this Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company, and its Parent and Subsidiaries (if any), by offering them an opportunity to participate in the Company’s future performance through awards of Options, Restricted Stock and Stock Awards. Capitalized terms not defined in the text are defined in Section 3.

3.    DEFINITIONS.

As used in this Plan, the following terms will have the following meanings:

“AWARD” means any award under this Plan, including any Option, Restricted Stock or Stock Award.

“AWARD AGREEMENT” means, with respect to each Award, the signed written agreement between the Company and the Participant setting forth the terms and conditions of the Award.

“BOARD” means the Board of Directors of the Company.

“CAUSE” means any cause, as defined by applicable law, for the termination of a Participant’s employment with the Company or a Parent or Subsidiary of the Company.

“CODE” means the Internal Revenue Code of 1986, as amended.

“COMMITTEE” means the Board of Directors.

“COMPANY” means NuTech Digital, Inc., a California corporation, or any successor corporation.

“DISABILITY” means a disability, whether temporary or permanent, partial or total, as determined by the Committee.

“EXCHANGE ACT” means the Securities Exchange Act of 1934, as amended.

“EXERCISE PRICE” means the price at which a holder of an Option may purchase the Shares issuable upon exercise of the Option.

“FAIR MARKET VALUE” means, as of any date, the value of a share of the Company’s Common Stock determined as follows:

(a)  if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal;

(b)  if such Common Stock is quoted on the NASDAQ National Market, its closing price on the NASDAQ National Market on the date of determination as reported in The Wall Street Journal;

(c)  if such Common Stock is publicly traded but is not listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal;

(d)  the price per share at which shares of the Company’s Common Stock are initially offered for sale to the public by the Company’s underwriters in the initial public offering of the Company’s Common Stock pursuant to a registration statement filed with the SEC under the Securities Act if the Award is made on the effective date of such registration statement; or

(e)  if none of the foregoing is applicable, by the Committee in good faith.

“INSIDER” means an officer or director of the Company or any other person whose transactions in the Company’s Common Stock are subject to Section 16 of the Exchange Act.

“OPTION” means an award of an option to purchase Shares pursuant to Section 7.

“PARENT” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

“PARTICIPANT” means a person who receives an Award under this Plan.

“PERFORMANCE FACTORS” means the factors selected by the Committee, in its sole and absolute discretion, from among the following measures to determine whether the performance goals applicable to Awards have been satisfied:

(a)  Net revenue and/or net revenue growth;

(b)  Earnings before income taxes and amortization and/or earnings before income taxes and amortization growth;

(c)  Operating income and/or operating income growth;

(d)  Net income and/or net income growth;

(e)  Earnings per share and/or earnings per share growth;

(f)  Total stockholder return and/or total stockholder return growth;

(g)  Return on equity;

(h)  Operating cash flow return on income;

(i)  Adjusted operating cash flow return on income;

(j)  Economic value added; and

(k)  Individual business objectives.

“PERFORMANCE PERIOD” means the period of service determined by the Committee, not to exceed five years, during which years of service or performance is to be measured for Restricted Stock Awards or Stock Awards.

“PLAN” means this NuTech Digital, Inc. 2001 Equity Incentive Plan, as amended from time to time.

“RESTRICTED STOCK AWARD” means an award of Shares pursuant to Section 8.

“SEC” means the Securities and Exchange Commission.

“SECURITIES ACT” means the Securities Act of 1933, as amended.

“SHARES” means shares of the Company’s Common Stock reserved for issuance under this Plan, as adjusted pursuant to Sections 4 and 19, and any successor security.

“STOCK AWARD” means an award of Shares, or cash in lieu of Shares, pursuant to Section 9.

“SUBSIDIARY” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

“TERMINATION” or “TERMINATED” means, for purposes of this Plan with respect to a Participant, that the Participant has for any reason ceased to provide services as an employee, officer, director, consultant, independent contractor, or advisor to the Company or a Parent or Subsidiary of the Company. An employee will not be deemed to have ceased to provide services in the case of (i) sick leave, (ii) military leave, or (iii) any other leave of absence approved by the Company, provided that such leave is for a period of not more than 90 days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute or unless provided otherwise pursuant to a formal policy adopted from time to time by the Company and issued and promulgated to employees in writing. In the case of any employee on an approved leave of absence, the Committee may make such provisions respecting suspension of vesting of the Award while on leave from the employ of the Company or a Subsidiary as it may deem appropriate, except that in no event may an Option be exercised after the expiration of the term set forth in the Option agreement. The Committee will have sole discretion to determine whether a Participant has ceased to provide services and the effective date on which the Participant ceased to provide services (the “Termination Date”).

4.    SHARES SUBJECT TO THE PLAN.

4.1    Number of Shares Available.    Subject to Sections 4.2 and 19, the total aggregate number of Shares initially reserved and available for grant and issuance pursuant to this Plan will be 3,500,000 Shares and will include Shares that are subject to: (a) issuance upon exercise of an Option but cease to be subject to such Option for any reason other than exercise of such Option; (b) an Award granted hereunder but forfeited or repurchased by the Company at the original issue price; and (c) an Award that otherwise terminates without Shares being issued. Subject to this Section 4.1, the number of Shares reserved and available for grant and issuance may be increased on the first day of January of each year so that the total of all Common Stock available for Awards shall be the maximum amount allowable under Regulation 260.140.45 of Title 10 of the California Code of Regulations. At all times the Company shall reserve and keep available a sufficient number of Shares as shall be required to satisfy the requirements of all outstanding Options granted under this Plan and all other outstanding but unvested Awards granted under this Plan. At no time shall the total number of shares issuable upon exercise of all outstanding Awards exceed the applicable percentage as calculated in accordance with the conditions and exclusions of Regulation 260.140.45 of Title 10 of the California Code of Regulations, based on the shares of the Company's Common Stock which are outstanding at the time the calculation is made.

4.2    Adjustment of Shares.    In the event that the number of outstanding shares is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration, then (a) the number of Shares reserved for issuance under this Plan, (b) the Exercise Prices of and number of Shares subject to outstanding Options, and (c) the number of Shares subject to other outstanding Awards will be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and compliance with applicable securities laws; provided, however, that fractions of a Share will not be issued but will either be replaced by a cash payment equal to the Fair Market Value of such fraction of a Share or will be rounded up to the nearest whole Share, as determined by the Committee.

5.    ELIGIBILITY.

ISOs (as defined in Section 7 below) may be granted only to employees (including officers and directors who are also employees) of the Company or of a Parent or Subsidiary of the Company. All other Awards may be granted to employees, officers, directors, consultants, independent contractors and advisors of the Company or any Parent or Subsidiary of the Company, provided such consultants, contractors and advisors render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction. A person may be granted more than one Award under this Plan.

6.    ADMINISTRATION.

6.1    Committee Authority.    This Plan will be administered by the Committee or by the Board acting as the Committee. Subject to the general purposes, terms and conditions of this Plan, and to the direction of the Board, the Committee will have full power to implement and carry out this Plan. Without limitation, the Committee will have the authority to:

(a)  construe and interpret this Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan;

(b)  prescribe, amend and rescind rules and regulations relating to this Plan or any Award;

(c)  select persons to receive Awards;

(d)  determine the form and terms of Awards;

(e)  determine the number of Shares or other consideration subject to Awards;

(f)  determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other

Awards under this Plan or any other incentive or compensation plan of the Company or any Parent or Subsidiary of the Company;

(g)  grant waivers of Plan or Award conditions;

(h)  determine the vesting, exercisability and payment of Awards;

(i)  correct any defect, supply any omission or reconcile any inconsistency in this Plan, any Award or any Award Agreement;

(j)  determine whether an Award has been earned; and

(k)  make all other determinations necessary or advisable for the administration of this Plan.

6.2    Committee Discretion.    Any determination made by the Committee with respect to any Award will be made at the time of grant of the Award or, unless in contravention of any express term of this Plan or Award, at any later time, and such determination will be final and binding on the Company and on all persons having an interest in any Award under this Plan. The Committee may delegate to one or more officers of the Company the authority to grant an Award under this Plan to Participants who are not Insiders of the Company.

7.    OPTIONS.

The Committee may grant Options to eligible persons and will determine whether such Options will be Incentive Stock Options within the meaning of the Code (“ISO”) or Nonqualified Stock Options (“NQSOs”), the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may be exercised, and all other terms and conditions of the Option, subject to the following:

7.1    Form of Option Grant.    Each Option granted under this Plan will be evidenced by an Award Agreement which will expressly identify the Option as an ISO or an NQSO (hereinafter referred to as the “Stock Option Agreement”), and will be in such form and contain such provisions (which need not be the same for each Participant) as the Committee may from time to time approve, and which will comply with and be subject to the terms and conditions of this Plan.

7.2    Date of Grant.    The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option, unless otherwise specified by the Committee. The Stock Option Agreement and a copy of this Plan will be delivered to the Participant within a reasonable time after the granting of the Option.

7.3    Exercise Period.    Options may be exercisable within the times or upon the events determined by the Committee as set forth in the Stock Option Agreement

governing such Option; provided, however, that no Option will be exercisable after the expiration of ten (10) years from the date the Option is granted; and provided further that no ISO granted to a person who directly or by attribution owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary of the Company (“Ten Percent Stockholder”) will be exercisable after the expiration of five (5) years from the date the ISO is granted. The Committee also may provide for Options to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines, provided, however, that in all events a Participant will be entitled to exercise an Option at the rate of at least 20% per year over five years from the date of grant, subject to reasonable conditions such as continued employment; and further provided that an Option granted to a Participant who is an officer, director or consultant may become fully exercisable, subject to reasonable conditions such as continued employment, at any time or during any period established by the Company.

7.4    Exercise Price.    The Exercise Price of an Option will be determined by the Committee when the Option is granted and may be not less than 85% of the Fair Market Value of the Shares on the date of grant; provided that: (a) the Exercise Price of an ISO will be not less than 100% of the Fair Market Value of the Shares on the date of grant; and (b) the Exercise Price of an Option granted to a Ten Percent Stockholder will not be less than 110% of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased may be made in accordance with Section 10 of this Plan.

7.5    Method of Exercise.    Options may be exercised only by delivery to the Company of a written stock option exercise agreement (the “Exercise Agreement”) in a form approved by the Committee, (which need not be the same for each Participant), stating the number of Shares being purchased, the restrictions imposed on the Shares purchased under such Exercise Agreement, if any, and such representations and agreements regarding the Participant’s investment intent and access to information and other matters, if any, as may be required or desirable by the Company to comply with applicable securities laws, together with payment in full of the Exercise Price for the number of Shares being purchased.

7.6    Termination.    Notwithstanding the exercise periods set forth in the Stock Option Agreement, exercise of an Option will always be subject to the following:

(a)  If the Participant’s service is Terminated for any reason except death or Disability, then the Participant may exercise such Participant’s Options only to the extent that such Options would have been exercisable upon the Termination Date no later than three (3) months after the Termination Date (or such longer time period not exceeding five (5) years as may be determined by the Committee, with any exercise beyond three (3) months after the Termination Date deemed to be an NQSO).

(b)  If the Participant’s service is Terminated because of the Participant’s death or Disability (or the Participant dies within three (3) months after a Termination other than for Cause or because of Participant’s Disability), then the Participant’s Options may be exercised only to the extent that such Options would have

been exercisable by the Participant on the Termination Date and must be exercised by the Participant (or the Participant’s legal representative) no later than twelve (12) months after the Termination Date (or such longer time period not exceeding five (5) years as may be determined by the Committee, with any such exercise beyond (i) three (3) months after the Termination Date when the Termination is for any reason other than the Participant’s death or Disability, or (ii) twelve (12) months after the Termination Date when the Termination is for Participant’s death or Disability, deemed to be an NQSO).

(c)  Notwithstanding the provisions in paragraph 7.6(a) above, if the Participant’s service is Terminated for Cause, neither the Participant, the Participant’s estate nor such other person who may then hold the Option shall be entitled to exercise any Option with respect to any Shares whatsoever, after Termination, whether or not after Termination the Participant may receive payment from the Company or a Subsidiary for vacation pay, for services rendered prior to Termination, for services rendered for the day on which Termination occurs, for salary in lieu of notice, or for any other benefits. For the purpose of this paragraph, Termination shall be deemed to occur on the date when the Company dispatches notice or advice to the Participant that his service is Terminated.

7.7    Limitations on Exercise.    The Committee may specify a reasonable minimum number of Shares that may be purchased on any exercise of an Option, provided that such minimum number will not prevent the Participant from exercising the Option for the full number of Shares for which it is then exercisable.

7.8    Limitations on ISO.    The aggregate Fair Market Value (determined as of the date of grant) of Shares with respect to which ISO are exercisable for the first time by a Participant during any calendar year (under this Plan or under any other incentive stock option plan of the Company, Parent or Subsidiary of the Company) will not exceed $100,000. If the Fair Market Value of Shares on the date of grant with respect to which ISO are exercisable for the first time by a Participant during any calendar year exceeds $100,000, then the Options for the first $100,000 worth of Shares to become exercisable in such calendar year will be ISO and the Options for the amount in excess of $100,000 that become exercisable in that calendar year will be NQSOs. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date of this Plan to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISO, such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.

7.9    Modification, Extension or Renewal.    The Committee may modify, extend or renew outstanding Options and authorize the grant of new Options in substitution therefore, provided that any such action may not, without the written consent of a Participant, impair any of such Participant’s rights under any Option previously granted. Any outstanding ISO that is modified, extended, renewed or otherwise altered will be treated in accordance with Section 424(h) of the Code. The Committee may reduce the Exercise Price of outstanding Options without the consent of Participants affected by a written notice to them; provided, however,

that the Exercise Price may not be reduced below the minimum Exercise Price that would be permitted under Section 7.4 of this Plan for Options granted on the date the action is taken to reduce the Exercise Price.

7.10    No Disqualification.    Notwithstanding any other provision in this Plan, no term of this Plan relating to ISO will be interpreted, amended or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code or, without the consent of the Participant affected, to disqualify any ISO under Section 422 of the Code.

8.    RESTRICTED STOCK.

A Restricted Stock Award is an offer by the Company to sell to an eligible person Shares that are subject to restrictions. The Committee will determine to whom an offer will be made, the number of Shares the person may purchase, the price to be paid (the “Purchase Price”), the restrictions to which the Shares will be subject, and all other terms and conditions of the Restricted Stock Award, subject to the following:

8.1    Form of Restricted Stock Award.    All purchases under a Restricted Stock Award made pursuant to this Plan will be evidenced by an Award Agreement (the “Restricted Stock Purchase Agreement”) that will be in such form (which need not be the same for each Participant) as the Committee will from time to time approve, and will comply with and be subject to the terms and conditions of this Plan. The offer of Restricted Stock will be accepted by the Participant’s execution and delivery of the Restricted Stock Purchase Agreement and full payment for the Shares to the Company within thirty (30) days from the date the Restricted Stock Purchase Agreement is delivered to the person. If such person does not execute and deliver the Restricted Stock Purchase Agreement along with full payment for the Shares to the Company within thirty (30) days, then the offer will terminate, unless otherwise extended by the Committee.

8.2    Purchase Price.    The Purchase Price of Shares sold pursuant to a Restricted Stock Award will be determined by the Committee on the date the Restricted Stock Award is granted and may not be less than 85% of the Fair Market Value of the Shares on the grant date, except in the case of a sale to a Ten Percent Stockholder, in which case the Purchase Price will be 100% of the Fair Market Value. Payment of the Purchase Price must be made in accordance with Section 10 of this Plan.

8.3    Terms of Restricted Stock Awards.    Restricted Stock Awards shall be subject to such restrictions as the Committee may impose. These restrictions may be based upon completion of a specified number of years of service with the Company or upon completion of the performance goals as set out in advance in the Participant’s individual Restricted Stock Purchase Agreement. Restricted Stock Awards may vary from Participant to Participant and between groups of Participants. Prior to the grant of a Restricted Stock Award, the Committee shall: (a) determine the nature, length and starting date of any Performance Period for the Restricted Stock Award; (b) select from among the Performance Factors to be

used to measure performance goals, if any; and (c) determine the number of Shares that may be awarded to the Participant. Prior to the payment of any Restricted Stock Award, the Committee shall determine the extent to which such Restricted Stock Award has been earned. Performance Periods may overlap and Participants may participate simultaneously with respect to Restricted Stock Awards that are subject to different Performance Periods and have different performance goals and other criteria.

8.4    Termination During Performance Period.    If a Participant is Terminated during a Performance Period for any reason, then such Participant will be entitled to payment (whether in Shares, cash or otherwise) with respect to the Restricted Stock Award only to the extent earned as of the date of Termination in accordance with the Restricted Stock Purchase Agreement, unless the Committee determines otherwise.

9.    STOCK AWARDS.

9.1    Awards of Stock.    A Stock Award is an award of Shares (which may consist of Restricted Stock) for services rendered to the Company or any Parent or Subsidiary of the Company. A Stock Award will be awarded pursuant to an Award Agreement (the “Stock Award Agreement”) that will be in such form (which need not be the same for each Participant) as the Committee will from time to time approve, and will comply with and be subject to the terms and conditions of this Plan. A Stock Award may be awarded upon satisfaction of such performance goals as are set out in advance in the Participant’s individual Stock Award Agreement (the “Performance Stock Award Agreement”) that will be in such form (which need not be the same for each Participant) as the Committee will from time to time approve, and will comply with and be subject to the terms and conditions of this Plan. Stock Awards may vary from Participant to Participant and between groups of Participants, and may be based upon the achievement of the Company, Parent or Subsidiary and/or individual performance factors or upon such other criteria as the Committee may determine.

9.2    Terms of Stock Awards.    The Committee will determine the number of Shares to be awarded to the Participant. If the Stock Award is being earned upon the satisfaction of performance goals pursuant to a Performance Stock Award Agreement, then the Committee will: (a) determine the nature, length and starting date of any Performance Period for each Stock Award; (b) select from among the Performance Factors to be used to measure the performance, if any; and (c) determine the number of Shares that may be awarded to the Participant. Prior to the payment of any Stock Award, the Committee shall determine the extent to which such Stock Award has been earned. Performance Periods may overlap and Participants may participate simultaneously with respect to Stock Awards that are subject to different Performance Periods and different performance goals and other criteria. The number of Shares may be fixed or may vary in accordance with such performance goals and criteria as may be determined by the Committee. The Committee may adjust the performance goals applicable to the Stock Awards to take into account changes in law and

accounting or tax rules and to make such adjustments as the Committee deems necessary or appropriate to reflect the impact of extraordinary or unusual items, events or circumstances to avoid windfalls or hardships.

9.3    Form of Payment.    The earned portion of a Stock Award may be paid to the Participant by the Company either currently or on a deferred basis, with such interest or dividend equivalent, if any, as the Committee may determine. Payment may be made in the form of cash or whole Shares or a combination thereof, either in a lump sum payment or in installments, all as the Committee will determine.

10.    PAYMENT FOR SHARE PURCHASES.

10.1    Payment.    Payment for Shares purchased pursuant to this Plan may be made in cash (by check) or, where expressly approved for the Participant by the Committee and where permitted by law:

(a)  by cancellation of indebtedness of the Company to the Participant;

(b)  by surrender of shares that either: (1) have been owned by the Participant for more than six (6) months and have been paid for within the meaning of SEC Rule 144 (and, if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such shares); or (2) were obtained by the Participant in the public market;

(c)  by tender of a full recourse promissory note having such terms as may be approved by the Committee and bearing interest at a rate sufficient to avoid imputation of income under Sections 483 and 1274 of the Code; provided, however, that Participants who are not employees or directors of the Company will not be entitled to purchase Shares with a promissory note unless the note is adequately secured by collateral other than the Shares;

(d)  by waiver of compensation due or accrued to the Participant for services rendered;

(e)  with respect only to purchases upon exercise of an Option, and provided that a public market for the Company’s stock exists:

(1)  through a “same day sale” commitment from the Participant and a broker-dealer that is a member of the National Association of Securities Dealers (an “NASD Dealer”) whereby the Participant irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased to pay for the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company; or

(2)  through a “margin” commitment from the Participant and a NASD Dealer whereby the Participant irrevocably elects to exercise the Option and to

pledge the Shares so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company; or

(f)  by any combination of the foregoing.

10.2    Loan Guarantees.    The Committee may help the Participant pay for Shares purchased under this Plan by authorizing a guarantee by the Company of a third-party loan to the Participant.

11.    WITHHOLDING TAXES.

11.1    Withholding Generally.    Whenever Shares are to be issued in satisfaction of Awards granted under this Plan, the Company may require the Participant to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for such Shares. Whenever, under this Plan, payments in satisfaction of Awards are to be made in cash, such payment will be net of an amount sufficient to satisfy federal, state, and local withholding tax requirements.

11.2    Stock Withholding.    When, under applicable tax laws, a participant incurs tax liability in connection with the exercise or vesting of any Award that is subject to tax withholding and the Participant is obligated to pay the Company the amount required to be withheld, the Committee may allow the Participant to satisfy the minimum withholding tax obligation by electing to have the Company withhold from the Shares to be issued that number of Shares having a Fair Market Value equal to the minimum amount required to be withheld, determined on the date that the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares withheld for this purpose will be made in accordance with the requirements established by the Committee and will be in writing in a form acceptable to the Committee.

12.    PRIVILEGES OF STOCK OWNERSHIP.

12.1    Voting and Dividends.    No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant. After Shares are issued to the Participant, the Participant will be a stockholder and will have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if such Shares are Restricted Stock, then any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock.

12.2    Financial Statements.    The Company will provide financial statements to each Participant prior to such Participant’s purchase of Shares under

this Plan, and to each Participant annually during the period such Participant has Awards outstanding; provided, however, the Company will not be required to provide such financial statements to Participants whose services in connection with the Company assure them access to equivalent information.

13.    NON-TRANSFERABILITY OF AWARDS.

Awards of Stock and Restricted Stock granted under this Plan, and any interest therein, will not be transferable or assignable by the Participant, and may not be made subject to execution, attachment or similar process, other than by will or by the laws of descent and distribution. Awards of Options granted under this Plan, and any interest therein, will not be transferable or assignable by the Participant, and may not be made subject to execution, attachment or similar process, other than by will or by the laws of descent and distribution, by instrument to an inter vivos or testamentary trust in which the options are to be passed to beneficiaries upon the death of the trustor, or by gift to “immediate family” as that term is defined in 17 C.F.R. 240.16a-1(e). During the lifetime of the Participant an Award will be exercisable only by the Participant. During the lifetime of the Participant, any elections with respect to an Award may be made only by the Participant unless otherwise determined by the Committee and set forth in the Award Agreement with respect to Awards that are not ISOs.

14.    CERTIFICATES.

All certificates for Shares or other securities delivered under this Plan will be subject to such stop transfer orders, legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable federal, state or foreign securities law, or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted.

15.    ESCROW; PLEDGE OF SHARES.

To enforce any restrictions on a Participant’s Shares, the Committee may require the Participant to deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Committee appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates. Any Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under this Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the payment of the Participant’s obligation to the Company under the promissory note; provided, however, that the Committee may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company will have full recourse against the Participant under the promissory note notwithstanding any pledge of the

Participant’s Shares or other collateral. In connection with any pledge of the Shares, the Participant will be required to execute and deliver a written pledge agreement in such form as the Committee will from time to time approve. The Shares purchased with the promissory note may be released from the pledge on a pro rata basis as the promissory note is paid.

16.    EXCHANGE OF AWARDS.

The Committee may, at any time or from time to time, authorize the Company, with the consent of the respective Participants, to issue new Awards in exchange for the surrender and cancellation of any or all outstanding Awards.

17.    SECURITIES LAW AND OTHER REGULATORY COMPLIANCE.

An Award will not be effective unless such Award is in compliance with all applicable federal and state securities laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to: (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and/or (b) completion of any registration or other qualification of such Shares under any state or federal law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so.

18.    NO OBLIGATION TO EMPLOY.

Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Parent or Subsidiary of the Company or limit in any way the right of the Company or any Parent or Subsidiary of the Company to terminate Participant’s employment or other relationship at any time, with or without cause.

19.    CORPORATE TRANSACTIONS.

19.1    Assumption or Replacement of Awards by Successor.    In the event of (a) a dissolution or liquidation of the Company, (b) a merger or consolidation in which the Company is not the surviving corporation (other than a merger or consolidation with a wholly-owned subsidiary, a reincorporation of the Company in a different jurisdiction, or

other transaction in which there is no substantial change in the stockholders of the Company or their relative stock holdings and the Awards granted under this Plan are assumed, converted or replaced by the successor corporation, which assumption will be binding on all Participants), (c) a merger in which the Company is the surviving corporation but after which the stockholders of the Company immediately prior to such merger (other than any stockholder that merges, or which owns or controls another corporation that merges, with the Company in such merger) cease to own their shares or other equity interest in the Company, (d) the sale of substantially all of the assets of the Company, or (e) the acquisition, sale, or transfer of more than 50% of the outstanding shares of the Company by tender offer or similar transaction, any or all outstanding Awards may be assumed, converted or replaced by the successor corporation (if any), which assumption, conversion or replacement will be binding on all Participants. In the alternative, the successor corporation may substitute equivalent Awards or provide substantially similar consideration to Participants as was provided to stockholders (after taking into account the existing provisions of the Awards). The successor corporation may also issue, in place of outstanding Shares of the Company held by the Participant, substantially similar shares or other property subject to repurchase restrictions no less favorable to the Participant. In the event such successor corporation (if any) refuses to assume or substitute Awards, as provided above, pursuant to a transaction described in this Subsection 19.1, such Awards will expire on such transaction at such time and on such conditions as the Committee will determine. Notwithstanding anything in this Plan to the contrary, the Committee may provide that the vesting of any or all Awards granted pursuant to this Plan will accelerate upon a transaction described in this Section 19. If the Committee exercises such discretion with respect to Options, such Options will become exercisable in full prior to the consummation of such event at such time and on such conditions as the Committee determines, and if such Options are not exercised prior to the consummation of the corporate transaction, they shall terminate at such time as determined by the Committee.

19.2    Other Treatment of Awards.    Subject to any greater rights granted to Participants under the foregoing provisions of this Section 19, in the event of the occurrence of any transaction described in Section 19.1, any outstanding Awards will be treated as provided in the applicable agreement or plan of merger, consolidation, dissolution, liquidation, or sale of assets.

19.3    Assumption of Awards by the Company.    The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either; (a) granting an Award under this Plan in substitution of such other company’s award; or (b) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan. Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant. In the event the Company assumes an award granted by another company, the terms and conditions of such award will remain

unchanged (except that the exercise price and the number and nature of Shares issuable upon exercise of any such option will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects to grant a new Option rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price.

20.    ADOPTION AND EFFECTIVE DATE.

This NuTech Digital, Inc. 2001 Equity Incentive Plan is effective as of May 15, 2001, the date it was adopted by the Board.

21.  STOCKHOLDER APPROVAL.

This Plan was approved by the stockholders of the Company on May 15, 2001.

22.    TERM OF PLAN/GOVERNING LAW.

Unless earlier terminated as provided herein, this Plan will terminate on May 15, 2011. This Plan and all agreements thereunder shall be governed by and construed in accordance with the laws of the State of California.

23.    AMENDMENT OR TERMINATION OF PLAN.

The Board may at any time terminate or amend this Plan in any respect, including without limitation amendment of any form of Award Agreement or instrument to be executed pursuant to this Plan; provided, however, that the Board will not, without the approval of the stockholders of the Company, amend this Plan in any manner that requires such stockholder approval under the Code, if applicable, or by any stock exchange or market on which the Common Stock of the Company is listed for trading.

24.    NONEXCLUSIVITY OF THE PLAN.

Neither the adoption of this Plan by the Board, the submission of this Plan to the stockholders of the Company for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock options and bonuses otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases.

25.    ACTION BY COMMITTEE.

Any action permitted or required to be taken by the Committee or any decision or determination permitted or required to be made by the Committee pursuant to this Plan shall be taken or made in the Committee’s sole and absolute discretion.

EX-10.2

EXHIBIT 10.2

US BANK LOGO APPEARS HERE

BUSINESS LOAN AGREEMENT

References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.

Borrower: NUTECH DIGITAL, INC. 15210 KESWICK STREET VAN NUYS, CA 91405 Lender: U.S. Bank National Association 15910 Ventura Boulevard Encino, CA 91436

THIS BUSINESS LOAN AGREEMENT between NUTECH DIGITAL, INC. (“Borrower”) and U.S. Bank National Association (“Lender”) is made and executed on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans and other financial accommodations, including those which may be described on any exhibit or schedule attached to this Agreement. All such loans and financial accommodations, together with all future loans and financial accommodations from Lender to Borrower, are referred to in this Agreement individually as the “Loan” and collectively as the “Loans.” Borrower understands and agrees that: (a) in granting, renewing, or extending any Loan, Lender is relying upon Borrower’s representations, warranties, and agreements, as set forth in this Agreement; (b} the granting, renewing, or extending of any Loan by Lender at all times shall be subject to Lender’s sole judgment and discretion; and (c) all such Loans shall be and shall remain subject to the following terms and conditions of this Agreement.

TERM.    This Agreement shall be effective as of March 20, 2001, and shall continue thereafter until all Indebtedness of Borrower to Lender has been performed in full and the parties terminate this Agreement in writing.

DEFINITIONS.    The following words shall have the following meanings when used in this Agreement. Terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. All references to dollar amounts shall mean amounts in lawful money of the United States of America.

Agreement.     The word “Agreement” means this Business Loan Agreement, as this Business Loan Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Business Loan Agreement from time to time.

Borrower.    The word “Borrower” means NUTECH DIGITAL, INC. “The word “Borrower” also includes, as applicable, all subsidiaries and affiliates of Borrower as provided below in the paragraph titled “Subsidiaries and Affiliates.”

CERCLA.    The word “CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended.

Cash Flow.    The words “Cash Flow” mean net income after taxes, and exclusive of extraordinary gains and income, plus depreciation and amortization.

Collateral.    The word “Collateral” means and includes without limitation all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, deed or trust, assignment, pledge, chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise.

Debt.    The word “Debt” means all of Borrower’s liabilities excluding Subordinated Debt.

ERISA.    The word “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

Event of Default.     The words “Event of Default” mean and include without limitation any of the Events of Default set forth below in the section titled ‘EVENTS OF DEFAULT.’

Grantor.    The word “Grantor” means and includes without limitation each and all of the persons or entities granting a Security Interest in any Collateral for the indebtedness, including without limitation all Borrowers granting such a Security Interest.

Guarantor.    The word “Guarantor” means and includes without limitation each and all of the guarantors, sureties, and accommodation parties in connection with any Indebtedness.

Indebtedness.    The word “Indebtedness” means and includes without limitation all Loans, together with all other obligations. debts and liabilities of Borrower to Lender, or anyone or more of them, as well as all claims by Lender against Borrower, or anyone or more of them; whether now or hereafter existing, voluntary or involuntary, due or not due, absolute or contingent, liquidated or unliquidated; whether Borrower may be liable individually or jointly with others; whether Borrower may be obligated as a guarantor, surety, or otherwise; whether recovery upon such Indebtedness may be or hereafter may become barred by any statute of limitations; and whether such Indebtedness may be or hereafter may become otherwise unenforceable.

Lender.    The word “Lender” means U.S. Bank National Association, its successors and assigns.

Liquid Assets.    The words “Liquid Assets” mean Borrower’s cash on hand plus Borrower’s readily marketable securities.

Loan.    The word “Loan” or “Loans” means and includes without limitation any and all commercial loans and financial accommodations from Lender to Borrower, whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time.

Note.    The word “Note” means and includes without limitation Borrower’s promissory note or notes, if any, evidencing Borrower’s Loan obligations in favor of Lender, as well as any substitute, replacement or refinancing note or notes therefor.

Permitted Liens.    The words “Permitted Liens” mean: (a) liens and security interests securing Indebtedness owed by Borrower to Lender; (b) liens for taxes, assessments, or similar charges either not yet due or being contested in good faith; (c) liens of materialmen, mechanics, warehousemen, or carriers, or other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (d) purchase money liens or purchase money security interests upon or in any property acquired or held by Borrower in the ordinary course of business to secure indebtedness outstanding on the date of this Agreement or permitted to be incurred under the paragraph of this Agreement titled “Indebtedness and Liens”; (e) liens and security interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (f) those liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of Borrower’s assets.

Related Documents.    The words “Related Documents” mean and include without limitation all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness.

Security Agreement.    The words “Security Agreement” mean and include without limitation any agreements, promises, covenants, arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security Interest.

Security Interest.    The words “Security Interest” mean and include without limitation any type of collateral security, whether in the form of a lien, charge, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise.

SARA.    The word “SARA” means the Superfund Amendments and Reauthorization Act of 1986 as now or hereafter amended.

Subordinated Debt.    The words “Subordinated Debt” mean indebtedness and liabilities of Borrower which have been subordinated by written agreement to indebtedness owed by Borrower to Lender in form and substance acceptable to Lender.

Tangible Net Worth.    The words “Tangible Net Worth” mean Borrower’s total assets excluding all intangible assets {i.e., goodwill, trademarks, patents, copyrights, organizational expenses, and similar intangible items, but including leaseholds and leasehold improvements) less total Debt.

Working Capital.    The words “Working Capital” mean Borrower’s current assets, excluding prepaid expenses, less Borrower’s current liabilities.

CONDITIONS PRECEDENT TO EACH ADVANCE.    Lender’s obligation to make the initial Loan Advance and each subsequent Loan Advance under this Agreement shall be subject to the fulfillment to Lender’s satisfaction of all of the conditions set forth in this Agreement and in the Related Documents.

Loan Documents.    Borrower shall provide to Lender in form satisfactory to Lender the following documents for the Loan: (a) the Note, (b) Security Agreements granting to Lender security interests in the Collateral, (c) Financing Statements perfecting Lender’s Security Interests; (d) evidence of insurance as required below; and (e) any other documents required under this Agreement or by Lender or its counsel, including without limitation any guaranties described below.

Borrower’s Authorization.    Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing the execution and delivery of this Agreement, the Note and the Related Documents, and such other authorizations and other documents and instruments as Lender or its counsel, in their sole discretion, may require.

Payment of Fees and Expenses.    Borrower shall have paid to Lender all fees, charges, and other expenses which are then due and payable as specified in this Agreement or any Related Document.

Representations and Warranties.    The representations and warranties set forth in this Agreement, in the Related Documents, and in any document or certificate delivered to Lender under this Agreement are true and correct.

No Event of Default.    There shall not exist at the time of any advance a condition which would constitute an Event of Default under this Agreement.

REPRESENTATIONS AND WARRANTIES.    Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of Loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists:

Organization.    Borrower is a corporation which is duly organized, validity existing, and in good standing under the laws of the State of California and is validly existing and in good standing in all states in which Borrower is doing business. Borrower has the full power and authority to own its properties and to transact the businesses in which it is presently engaged or presently proposes to engage. Borrower also is duly qualified as a foreign corporation and is in good standing in all states in which the failure to so qualify would have a material adverse effect on its businesses or financial condition.

Authorization.    The execution, delivery, and performance of this Agreement and all Related Documents by Borrower, to the extent to be executed, delivered or performed by Borrower, have been duly authorized by all necessary action by Borrower; do not require the consent or approval of any other person, regulatory authority or governmental body; and do not conflict with, result in a violation of, or constitute a default under (a) any provision of its articles of incorporation or organization, or bylaws, or any agreement or other instrument binding upon Borrower or (b) any law, governmental regulation, court decree, or order applicable to Borrower.

Financial Information.    Each financial statement of Borrower supplied to Lender truly and completely disclosed Borrower’s financial condition as of the date of the statement, and there has been no material adverse change in Borrower’s financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements.

Legal Effect.    This Agreement constitutes, and any instrument or agreement required hereunder to be given by Borrower when delivered will constitute, legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms.

Properties.    Except as contemplated by this Agreement or as previously disclosed in Borrower’s financial statements or in writing to Lender and as accepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns and has good title to all of Borrower’s properties free and clear of all Security Interests, and has not executed any security documents or financing statements relating to such properties. All of Borrower’s properties are titled in Borrower’s legal name, and Borrower has not used, or filed a financing statement under, any other name for at least the last five (5) years.

Hazardous Substances.    The terms “hazardous waste,” “hazardous substance,” “disposal,” “release,” and “threatened release,” as used in this Agreement, shall have the same meanings as set forth in the “CERCLA,” “SARA,” the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., Chapters 6.5 through 7.7 of Division 20 of the California Health and Safety Code, Section 25100, et sec., or other applicable state or Federal laws, rules, or regulations adopted pursuant to any of the foregoing. Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (a) During the period of Borrowers ownership of the properties, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release or any hazardous waste or substance by any person on, under, about or from any or the properties. (b) Borrower has no knowledge of, or reason to believe that there has been (i) any use, generation, manufacture, storage, treatment, disposal release, or threatened release of any hazardous waste or substance on, under, about or from the properties by any prior owners or occupants of any of the properties, or (ii) any actual or threatened litigation or claims of any kind by any person relating to such matters. (c) Neither Borrower nor any tenant, contractor, agent or other authorized user of any of the properties shall use, generate, manufacture, store, treat, dispose of, or release any hazardous waste or substance on, under, about or from any of the properties; and any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations, and ordinances, including without limitation those laws, regulations and ordinances described above. Borrower authorizes Lender and its agents to enter upon the properties to make such inspections and tests as Lender may deem appropriate to determine compliance of the properties with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower’s expense and for Lender’s purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrower’s due diligence in investigating the properties for hazardous waste and hazardous substances. Borrower hereby (a) releases and waives any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and (b) agrees to indemnify and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release of a hazardous waste or substance on the properties. The provisions of this section of the Agreement, including the obligation to indemnify, shall survive the payment of the Indebtedness and the termination or expiration of this Agreement and shall not be affected by Lender’s acquisition of any interest in any of the properties, whether by foreclosure or otherwise.

Litigation and Claims.    No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower’s financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender in writing.

Taxes.    To the best of Borrower’s knowledge, all tax returns and reports of Borrower that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided.

Lien Priority.    Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrower’s Loan and Note, that would be prior or that may in any way be superior to Lender’s Security Interests and rights in and to such Collateral.

Binding Effect.    This Agreement, the Note, all Security Agreements directly or indirectly securing repayment of Borrower’s Loan and Note and all of the Related Documents are binding upon Borrower as well as upon Borrower’s successors, representatives and assigns, and are legally enforceable in accordance with their respective terms.

Commercial Purposes.    Borrower intends to use the Loan proceeds solely for business or commercial related purposes.

Employee Benefit Plans.    Each employee benefit plan as to which Borrower may have any liability complies in all material respects with all applicable requirements of law and regulations, and (i) no Reportable Event nor Prohibited Transaction (as defined in ERISA) has occurred with respect to any such plan, (ii) Borrower has not withdrawn from any such plan or initiated steps to do so, (iii) no steps have been taken to terminate any such plan, and (iv) there are no unfunded liabilities other than those previously disclosed to Lender in writing.

Location of Borrower’s Offices and Records.    Borrower’s place of business, or Borrower’s chief executive office, if Borrower has more than one place of business, is located at 15210 KESWICK STREET, VAN NUYS, CA 91405. Unless Borrower has designated otherwise in writing this location is also the office or offices where Borrower keeps its records concerning the Collateral.

Information.    All information heretofore or contemporaneously herewith furnished by Borrower to Lender for the purposes of or in connection with this Agreement or any transaction contemplated hereby is, and any information hereafter furnished by or on behalf of Borrower to Lender will be, true and accurate in every material respect on the date as of which such information is dated or certified; and none of such information is or will be incomplete by omitting to state any material fact necessary to make such information not misleading.

Survival of Representations and Warranties.    Borrower understands and agrees that Lender, without independent investigation, is relying upon the above representations and warranties in extending Loan Advances to Borrower. Borrower further agrees that the foregoing representations and warranties shall be continuing in nature and shall remain in full force and effect until such time as Borrower’s indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur.

AFFIRMATIVE COVENANTS.    Borrower covenants and agrees with Lender that, while this Agreement is in effect, Borrower will:

Litigation.    Promptly inform Lender in writing of (a) all material adverse changes in Borrower’s financial condition, and (b) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor.

Financial Records.    Maintain its books and records in accordance with generally accepted accounting principles, applied on a consistent basis, and permit Lender to examine and audit Borrowers books and records at all reasonable times.

Financial Statements.    Furnish Lender with, as soon as available, but in no event later than ninety (90) days after the end of each fiscal year, Borrower’s balance sheet and income statement for the year ended, reviewed by a certified public accountant satisfactory to Lender, and, as soon as available, but in no event later than forty five (45) days after the end of each fiscal quarter, Borrower’s balance sheet and profit and loss statement for the period ended, prepared and certified as correct to the best knowledge and belief by Borrower’s chief financial officer or other officer or person acceptable to Lender. All financial reports required to be provided under this Agreement shall be prepared in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as being true and correct.

Additional Information.    Furnish such additional information and statements, lists of assets and liabilities, agings of receivables and payables, inventory schedules, budgets, forecasts, tax returns, and other reports with respect to Borrower’s financial condition and business operations as Lender may request from time to time.

Financial Covenants and Ratios.    Comply with the following covenants and ratios:

Tangible Net Worth.    Maintain a minimum Tangible Net Worth of not less than $400,000.00.

Current Ratio.    Maintain a ratio of Current Assets to Current Liabilities in excess of 1.10 to 1.00.

Income.    Maintain not less than the following income level: Company to report profits at Fiscal Year End, after officers’ compensation, taxes, advances, withdrawals. and distributions.

The following provisions shall apply for purposes of determining compliance with the foregoing financial covenants and ratios: Compliance with the foregoing ratios/amounts shall be determined by calculating the ratios/amounts as of the end of each fiscal quarter. Except as provided above, an computations made to determine compliance with the requirements contained in this paragraph shall be made in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as being true and correct.

Insurance.    Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower’s properties and operations, in form, amounts, coverages and with insurance companies reasonably acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be canceled or diminished without at least ten (10) days’ prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such loss payable or other endorsements as Lender may require.

Insurance Reports.    Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such Information as Lender may reasonably request, including without limitation the following: (a) the name of the insurer; (b) the risks insured; (c) the amount of the policy; (d) the properties insured; (e) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (f) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower.

Guaranties.    Prior to disbursement of any Loan proceeds, furnish executed guaranties of the Loans in favor of Lender, executed by the guarantor named below, on Lender’s forms, and in the amount and under the conditions spelled out in those guaranties.

Guarantor	Amount
LEE KASPER	Unlimited

Other Agreements.    Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements.

Loan Fees and Charges.    In addition to all other agreed upon fees and charges, pay the following: $2,563.00.

Loan Proceeds.    Use all Loan proceeds solely for Borrower’s business operations, unless specifically consented to the contrary by Lender writing.

Taxes, Charges and Liens.    Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments. taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower’s properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment, tax, charge, levy, lien or claim so long as (a) the legality of the same shall be contested in good faith by appropriate proceedings, and (b) Borrower shall have established on its books adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim in accordance with generally accepted accounting practices. Borrower, upon demand of Lender, will furnish to Lender evidence of payment of the assessments, taxes, charges, levies, liens and claims and will authorize the appropriate governmental official to deliver to Lender at any time a written statement of any assessments, taxes, charges, levies, liens and claims against Borrower’s properties, income, or profits,

Performance.    Perform and comply with all terms, conditions, and provisions set forth in this Agreement and in the Related Documents in a timely manner, and promptly notify Lender if Borrower learns of the occurrence of any event which constitutes an Event of Default under this Agreement or under any of the Related Documents.

Operations.    Maintain executive and management personnel with substantially the same qualifications and experience as the present executive and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable and prudent manner and in compliance with all applicable federal, state and municipal laws, ordinances, rules and regulations respecting its properties, charters, businesses and operations, including without limitation, compliance with the Americans With Disabilities Act and with all minimum funding standards and other requirements of ERISA and other laws applicable to Borrower’s employee benefit plans.

Inspection.    Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower’s other properties and to examine or audit Borrower’s books, accounts, and records and to make copies and memoranda of Borrower’s books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with copies of any records it may request, all at Borrower’s expense.

Compliance Certificate.    Unless waived in writing by Lender, provide Lender NOT REQUIRED and at the time of each disbursement of Loan proceeds with a certificate executed by Borrower’s chief financial officer, or other officer or person acceptable to Lender, certifying that the representations and warranties set forth in this Agreement are true and correct as of the date of the certificate and further certifying that, as of the date of the certificate, no Event of Default exists under this Agreement.

Environmental Compliance and Reports.    Borrower shall comply in all respects with all environmental protection federal, state and local laws, statutes, regulations and ordinances; not cause or permit to exist, as a result of an intentional or unintentional action or omission on its part or on the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice, summons, lien, citation, directive, letter or other communication from any governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower’s part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources.

Additional Assurances.    Make, execute and deliver to Lender such promissory note, mortgages, deeds of trust, security agreements, financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security Interests.

RECOVERY OF ADDITIONAL COSTS.    If the imposition of or any change in any law, rule, regulation or guideline, or the interpretation or application of any thereof by any court or administrative or governmental authority (including any request or policy not having the force of law) shall impose, modify or make applicable any taxes (except U.S. federal, state or local income or franchise taxes imposed on Lender), reserve requirements, capital adequacy requirements or other obligations which would (a) increase the cost to Lender for extending or maintaining the credit facilities to which this Agreement relates, (b) reduce the amounts payable to Lender under this Agreement or the Related Documents, or (c) reduce the rate of return on Lender’s capital as a consequence of Lender’s obligations with respect to the credit facilities to which this Agreement relates, then Borrower agrees to pay Lender such additional amounts as will compensate Lender therefore, within five (5) days after Lender’s written demand for such payment, which demand shall be accompanied by an explanation of such imposition or charge and a calculation in reasonable detail of the additional amounts payable by Borrower, which explanation and calculations shall be conclusive in the absence of manifest error,

NEGATIVE COVENANTS.    Borrower covenants and agrees with lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender:

Indebtedness and Liens.    (a) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this Agreement, create, incur or assume indebtedness for borrowed money, including capital leases, (b) except as allowed as a Permitted Lien, sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of Borrower’s assets, or (c) sell with recourse any of Borrower’s accounts, except to Lender.

Continuity of Operations.    (a) Engage in any business activities substantially different than those in which Borrower is presently engaged, (b) cease operations, liquidate, merge, transfer, acquire or consolidate with any other entity, change ownership, change its name, dissolve or transfer or sell Collateral out of the ordinary course of business, (c) pay any dividends on Borrower’s stock (other than dividends payable in its stock), provided, however that notwithstanding the foregoing, but only so long as no Event of Default has occurred and is continuing or would result from the payment of dividends, if Borrower is a “Subchapter S Corporation” (as defined in the Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends on its stock to its shareholders from time to time in amounts necessary to enable the shareholders to pay income taxes and make estimated income tax payments to satisfy their liabilities under federal and state law which arise solely from their status as Shareholders of a Subchapter S Corporation because of their ownership of shares of stock of Borrower, or (d) purchase or retire any of Borrower’s outstanding shares or alter or amend Borrower’s capital structure.

Loans, Acquisitions and Guaranties.    (a) Loan, invest in or advance money or assets, (b) purchase, create or acquire any interest in any other enterprise or entity, or (c) incur any obligation as surety or guarantor other than in the ordinary course of business.

CESSATION OF ADVANCES.    If Lender has made any commitment to make any Loan to Borrower, whether under his Agreement or under any other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (a) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (c) there occurs a material adverse change in Borrower’s financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor’s guaranty of the Loan or any other loan with Lender; or (e) Lender in good faith deems itself insecure, even though no Event of Default shall have occurred.

ADDITIONAL FINANCIAL COVENANTS AND RATIOS. NET WORTH RATIO.    Maintain a ratio of Total Liabilities to Tangible Net Worth of less than 8.00 to 1.00, to be reduced to 6.00 to 1.00 at June 30, 2001 and to 4.50 to 1.00 by Fiscal Year End December 31, 2001. The Leverage Ratio is defined as total liabilities divided by tangible net worth.

AGING AND LISTING OF ACCOUNTS RECEIVABLE (AND PAYABLE).    Borrower covenants and agrees with Lender that, while this Agreement is in effect, Borrower shall deliver to Lender twenty (20) days after the end of each quarter, a detailed aging of Borrower’s accounts and contracts receivable and accounts payable as of the last day of that quarter, together with an explanation of any adjustments made at the end of that quarter all in a form acceptable to Lender.

INVENTORY REPORT.    Borrower covenants and agrees with Lender that, while this Agreement is in effect, Borrower shall deliver to Lender within twenty (20) days after the end of each quarter, a detailed listing of the Inventory of Borrower as of the last day of that quarter, prepared in a form acceptable to Lender.

BORROWER’S SUBMISSION OF TAX RETURNS.    Borrower covenants and agrees with Lender that, while this Agreement is in effect, Borrower will furnish to Lender, no later than thirty (30) days after filing thereof, a copy of Borrowers filed federal tax return (including all applicable schedules).

GUARANTOR’S SUBMISSION OF FINANCIAL STATEMENTS AND TAX RETURNS.    Borrower covenants and agrees with Lender that, while this Agreement is in effect, Guarantor will furnish to Lender the following: 1) As soon as available, but in no event later than March 31st of each year, Guarantor’s personal financial statement for such yearly period, prepared and certified as correct to the best knowledge and belief by Guarantor. 2) No later than thirty (30) days after filing thereof, a copy of Guarantor’s filed federal tax return (including all applicable schedules and K-1s).

ADDITIONAL FINANCIAL PROVISIONS.    No consecutive quarterly losses allowed. ADDITIONAL PROVISIONS.

1)  US Bank National Association to hold a first priority interest on the company’s assets. SBA loan to fully subordinate their interest to the bank prior to funding,

2)  Subject to review of CPA prepared financial statements as of Fiscal Year End December 31, 2000.

3)  Verification of Guarantor’s liquid assets reflecting minimum liquidity of $200,000.00.

RIGHT OF SETOFF.    Borrower grants to Lender a contractual security interest in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender all Borrower’s right, title and interest in and to, Borrower’s accounts with Lender (whether checking, savings, or some other account), including without limitation all accounts held jointly with someone else and all accounts Borrower may open in the future, excluding however all IRA and Keogh accounts, and all trust accounts for which the grant of a security interest would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts.

EVENTS OF DEFAULT.    Each of the following shall constitute an Event of Default under this Agreement:

Default on Indebtedness.    Failure of Borrower to make any payment when due on the Loans.

Other Defaults.    Failure of Borrower or any Guarantor to comply with or to perform when due any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents, or failure of Borrower to comply with or to perform any other term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.

Default in Favor of Third Parties.    Should Borrower or any Guarantor default under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower’s property or Borrower’s or any Guarantor’s ability to repay the Loans or perform their respective obligations under this Agreement or any of the Related Documents.

False Statements.    Any warranty, representation or statement made or furnished to Lender by or on behalf of Borrower or any Guarantor under this Agreement or the Related Documents is false or misleading in any material respect at the time made or furnished, or becomes false or misleading at any time thereafter.

Defective Collateralization.    This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any Security Agreement to create a valid and perfected Security Interest) at any time and for any reason.

Insolvency.    The dissolution or termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.

Creditor or Forfeiture Proceedings.    Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower, any creditor of any Guarantor against any collateral securing the Indebtedness, or by any governmental agency. This includes a garnishment, attachment, or levy on or of any of Borrower’s deposit accounts with Lender.

Events Affecting Guarantor.    Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness.

Change In Ownership.    Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.

Adverse Change.    A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired.

Insecurity.    Lender, in good faith, deems itself insecure.

EFFECT OF AN EVENT OF DEFAULT.    If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make Loan Advances or disbursements), and, at Lender’s option, all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the “Insolvency” subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender’s rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect Lender’s right to declare a default and to exercise its rights and remedies.

MISCELLANEOUS PROVISIONS.    The following miscellaneous provisions are a part of this Agreement:

Amendments.    This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.

Applicable Law.    This Agreement has been delivered to Lender and accepted by Lender in the State of California. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of Sacramento County, the State of California. Subject to the provisions on arbitration, this Agreement shall be governed by and construed in accordance with the laws of the State of California.

Arbitration.    Lender and Borrower agree that all disputes, claims and controversies between them, whether individual, joint, or class in nature, arising from this Agreement or otherwise, including without limitation contract and tort disputes, shall be arbitrated pursuant to the Rules of the American Arbitration Association, upon request of either party. No act to take or dispose of any Collateral shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, without limitation, obtaining injunctive relief or a temporary restraining order; invoking a power of sale under any deed of trust or mortgage; obtaining a writ of attachment or imposition of a receiver; or exercising any rights relating to personal properly, including taking or disposing of such property with or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, or controversies concerning the lawfulness or reasonableness of any act, or exercise of any right, concerning any Collateral, including any claim to rescind, reform, or otherwise modify any agreement relating to the Collateral, shall also be arbitrated, provided however that no arbitrator shall have the right or the power to enjoin or restrain any act of any party. Lender and Borrower agree that in the event of an action for judicial foreclosure pursuant to California Code of Civil Procedure Section 726, or any similar provision in any other state, the commencement of such an action will not constitute a waiver of the right to arbitrate and the court shall refer to arbitration as much of such action, including counterclaims, as lawfully may be referred to arbitration. judgment upon any award rendered by any arbitrator may be entered in any court having jurisdiction. Nothing in this Agreement shall preclude any party from seeking equitable relief from a court of competent jurisdiction. The statute of limitations, estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in an action brought by a party shall be applicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action for these purposes. The Federal Arbitration Act shall apply to the construction, interpretation, and enforcement of this arbitration provision.

Caption Headings.    Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement.

Consent to Loan Participation.    Borrower agrees and consents to Lender’s sale or transfer, whether now or later, of one or more participation interests in the Loans to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy it may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loans and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower’s obligation under the Loans irrespective of the failure or insolvency of any holder of any interest in the Loans. Borrower further agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against Lender.

Costs and Expenses.    Borrower agrees to pay upon demand all of Lender’s expenses, including without limitation attorneys’ fees, incurred in connection with the preparation, execution, enforcement, modification and collection of this Agreement or in connection with the Loans made pursuant to this Agreement. Lender may pay someone else to help collect the Loans and to enforce this Agreement, and Borrower will pay that amount. This includes, subject to any limits under applicable law, Lender’s attorneys’ fees and Lender’s legal expenses, whether or not there is a lawsuit, including attorneys’ fees for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Borrower also will pay any court costs, in addition to all other sums provided by law.

Notices.    All notices required to be given under this Agreement shall be given in writing, may be sent by telefacsimile (unless otherwise required by law), and shall be effective when actually delivered or when deposited with a nationally recognized overnight courier or deposited in the United States mail, first class, postage prepaid, addressed to the party to whom the notice is to be given at the address shown above. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party’s address. To the extent permitted by applicable law, if there is more than one Borrower, notice to any Borrower will constitute notice to all Borrowers. For notice purposes, Borrower will keep Lender informed at all times of Borrower’s current address(es).

Severability.    If a court of competent jurisdiction finds any provision of this Agreement to be invalid or unenforceable as to any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances. If feasible, any such offending provision shall be deemed to be modified to be within the limits of enforceability or validity; however, if the offending provision cannot be so modified, it shall be stricken and all other provisions of this Agreement in all other respects shall remain valid and enforceable.

Subsidiaries and Affiliates of Borrower.    To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation any representation, warranty or covenant, the word “Borrower” as used herein shall include all subsidiaries and affiliates of Borrower. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any subsidiary or affiliate of Borrower.

Successors and Assigns.    All covenants and agreements contained by or on behalf of Borrower shall bind its successors and assigns and shall inure to the benefit of Lender, its successors and assigns. Borrower shall not, however, have the right to assign its rights under this Agreement or any interest therein, without the prior written consent of Lender.

Survival.    All warranties. representations, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement shall be considered to have been relied upon by Lender and will survive the making of the Loan and delivery to Lender of the Related Documents, regardless of any investigation made by Lender or on Lender’s behalf.

Time Is of the Essence.    Time is of the essence in the performance of this Agreement.

Waiver.    Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender’s rights or of any obligations of Borrower or of any Guarantor as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent in subsequent instances where such consent is required, and in all cases such consent may be granted or withheld in the sole discretion of Lender.

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF MARCH 20, 2001.

BORROWER:

NUTECH DIGITAL, INC.

By:	/s/    LEE KASPER
	LEE KASPER, PRESIDENT SECRETARY

LENDER:

U.S. Bank National Association

By:	/s/
	Authorized Officer

Due April 30th 2003

Customer # 6517305943

Loan # 18/26

AMENDMENT TO LOAN AGREEMENT AND NOTE

This amendment (the “Amendment”) dated as of the date specified below, is by and between the borrower (the “Borrower”) and the bank (the “Bank”) identified below.

RECITALS

A.    The Borrower and the Bank have executed a Loan Agreement (the “Agreement”) dated MARCH 20, 2001 and the Borrower has executed a Note (the “Note”), dated MARCH 20, 2001, either or both which may have been amended from time to time, and the Borrower (and if applicable, certain third parties) have executed the collateral documents which may or may not be identified in the Agreement and certain other related documents (collectively the “Loan Documents”), setting forth the terms and conditions upon which the Borrower may obtain loans from the Bank from time to time in the original amount of $ 500,000.00, as may be amended from time to time.

B.    The Borrower has requested that the Bank permit certain modifications to the Agreement and Note as described below.

C.    The Bank has agreed to such modifications, but only upon the terms and conditions outlined in this Amendment.

TERMS OF AGREEMENT

In consideration of the mutual covenants contained herein, and for other good and valuable consideration, the Borrower and the Bank agree as follows:

x  Extension of Maturity Date.    If checked here, any references in the Agreement or Note to the maturity date or date of final payment are hereby deleted and replaced with “APRIL 30, 2003”.

x  Change in Maximum Loan Amount.    If checked here, all references to “$ 500,000.00” in the Agreement and in the Note (whether or not numerically) as the maximum loan amount which may be borrowed from time to time are hereby deleted and replaced with “$ 650.000.00”.

¨  Change in Multiple Advance Termination Date.    If checked here, all references to “ N/A” as the termination date for multiple advances are hereby deleted and replaced with “N/A”.

Change in Financial Covenant(s).

(i)  ¨   If checked here, all references to “$            ” in the Agreement as the minimum Net Working Capital amount are hereby deleted and replaced with “$            ” for the period beginning             and thereafter.

(ii)  x  If checked here, all references to “$400,000.00” in the Agreement as the minimum Tangible Net Worth amount are hereby deleted and replaced with “$1,000,000.00”, for the period beginning 03/20/02 and thereafter.

(iii)  x  If checked here, all references to “4.50 TO 1.00” in the Agreement as the maximum Debt to Worth Ratio are hereby deleted and replaced with “4.00 TO 1.00” for the period beginning 03/20/02 and thereafter.

(iv)  ¨  If checked here, all references to “            ” in the Agreement as the minimum Current Ratio are hereby deleted and replaced with “            “ for the period beginning                  and thereafter.

(v)  ¨  If checked here, all references to “$            ” in the Agreement as the maximum Capital Expenditures amount are hereby deleted and replaced with “$            ” for the period beginning                  and thereafter.

(vi)  ¨  If checked here, all references to “            ” in the Agreement as the minimum Cash Flow Coverage Ratio are hereby deleted and replaced with “            ” for the period beginning                  and thereafter.

(vii)  ¨  If checked here, all references to “$            ” in the Agreement as the maximum Officers, Directors, Partners, and Management Salaries and Other Compensation amount are hereby deleted and replaced with “$            ” for the period beginning                  and thereafter.

¨  Change in Payment Schedule.    If checked here, effective upon the date of this Amendment, any payment terms are amended as follows:

¨  Change in Late Payment Fee.    If checked here, subject to applicable law, if any payment is not made on or before its due date, the Bank may collect a delinquency charge of             % of the unpaid amount. Collection of the late payment fee shall not be deemed to be a waiver of the Bank’s right to declare a default hereunder.

Effectiveness of Prior Documents.    Except as specifically amended hereby, the Agreement, the Note and the other Loan Documents shall remain in full force and effect in accordance with their respective terms. All warranties and representations contained in the Agreement and the other Loan Documents are hereby reconfirmed as of the date hereof All collateral previously provided to secure the Agreement and/or Note continues as security, and all guaranties guaranteeing obligations under the Loan Documents remain in full force and effect. This is an amendment, not a novation.

Preconditions to Effectiveness.    This Amendment shall only become effective upon execution by the Borrower and the Bank, and approval by any other third party required by the Bank.

No Waiver of Defaults; Warranties.    This Amendment shall not be construed as or be deemed to be a waiver by the Bank of existing defaults by the Borrower, whether known or undiscovered. All agreements, representations and warranties made herein shall survive the execution of this Amendment.

Counterparts.    This Amendment may be signed in any number of counterparts, each of which shall be considered an original, but when taken together shall constitute one document.

Authorization.    The Borrower represents and warrants that the execution, delivery and performance of this Amendment and the documents referenced herein are within the authority of the Borrower and have been duly authorized by all necessary action.

Attachments.    All documents attached hereto, including any appendices, schedules, riders, and exhibits to this Amendment, are hereby expressly incorporated herein by reference.

March 20, 2002

Dated as of:                                                                          

			NUTECH DIGITAL, INC.
(Individual Borrower)			Borrower Name (Organization)
		(SEAL)	a	CALIFORNIA Corporation
			By:	/s/    LEE KASPER
Borrower Name
			Name and Title: Lee Kasper, President
	N/A	(SEAL)
			By:
Borrower Name			Name and Title:
	N/A
Agreed to:
	U.S. BANK N.A.
	(Bank)
By:	/s/    GUS GMUSAYNT
Name and Title: Gus Gmusaynt, Vice President

For additional terms see attached addendum

AUTHORIZATION FOR PREAUTHORIZED

DEBITS FOR PAYMENT OF LOANS

1.    NuTech Digital. Inc.    (“Customer”) hereby authorizes and requests U.S. BANK NATIONAL ASSOCIATION (“U.S. Bank”) to initiate debit entries (“withdrawals”) from the account indicated below and to transfer the withdrawn funds in accordance with the following instructions.

2.    The withdrawals shall be made from:  x  Checking  ¨  Savings  ¨  Money Market

Account Number 1-534-9182-4642

Maintained at X Branch           Bk TR/ABA No.

City Encino State CA Zip 91436

3.    The withdrawn funds shall be transferred to U.S. Bank for application to:

Loan Number                  (the “Loan”)                 

Maintained at                            Bk TR/ABA No.             

City                          State      Zip             .

4.    The amount of each withdrawal shall be:

¨  A fixed amount of $

¨  An amount equal to each scheduled payment periodically due on the Loan of (select only one):

¨  Accrued Interest only  ¨  Designated Principal Payment plus Accrued Interest

¨  Designated Principal Payment only  ¨  Designated Payment of Principal and Interest

U.S. Bank may apply the amount withdrawn as authorized pursuant to the documents governing the Loan.

5.    Withdrawals shall be made on each payment due date of the Loan, which is the:

¨           day of each calendar month

¨           day of each              (list applicable month(s) for quarterly, semi-annual or annual payments)

¨           day of each calendar month beginning                  through and including and on the          day of each (list applicable month(s)) thereafter.

If this box is checked  ¨, notwithstanding the foregoing, Customer acknowledges that U.S. Bank will not make a withdrawal on the final payment due date of the Loan and that U.S. Bank will bill Customer for such final payment.

Withdrawals shall be made on each day indicated above or on the following business day if that day falls on a Saturday, Sunday or legal holiday in the state where the depository account is held.

If there are insufficient funds in the account described above or U.S. Bank is otherwise unable to make any preauthorized debit, U.S. Bank may, at its option, (a) make the

automatic debit notwithstanding insufficient available funds and allow the account to become temporarily overdrawn, or (b) refuse to make the automatic debit, in which case Customer agrees to separately make Customer’s Loan payment. Customer agrees to pay all fees on the account resulting from the automatic debits, including any overdraft/NSF charges, and the amount of any resulting overdraft.

Note: If the account indicated in paragraph 2 above is a Money Market Account, the number and frequency of withdrawals is limited as set out in Customers Agreement with U.S. Bank governing such Money Market Account.

6.    Customer acknowledges and agrees that U.S. Bank may cancel this automatic withdrawal service at any time and will endeavor to give written notice to Customer of such cancellation.

7.    Subject to paragraph 6 above, this authorization shall remain in full force and effect until U.S. Bank has received written notification from Customer that this authorization is terminated in such time as to afford U.S. Bank a reasonable opportunity to act on it.

Customer acknowledges receipt of a signed copy of this authorization.

NAME:  /S/    LEE KASPER	TITLE
BY:	DATE:

ADDENDUM TO AMENDMENT TO LOAN AGREEMENT AND NOTE

This Addendum is made part of the Amendment to Loan Agreement and Note (the “Amendment”) made and entered into by and between the undersigned borrower (the “Borrower”) and the undersigned bank (the “Bank”) as of the date identified below. The following provisions are hereby added to the Agreement, (or to the extent such provisions already exist, are hereby modified) as follows.

1)  Borrower agrees with Bank that the section titled “Financial Statements” has been modified and replaced with:

Furnish Bank with, as soon as available, but in no event later than one hundred twenty (120) days after the end of each fiscal year, Borrower’s balance sheet and income statement for the year ended, audited by a certified public accountant satisfactory to Bank, and, as soon as available, but in no event later than sixty (60) days after the end of each fiscal quarter, Borrower’s balance sheet and profit and loss statement for the period ended, reviewed by a certified public accountant satisfactory to Bank. All financial reports required to be provided under this Agreement shall be prepared in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as being true and correct.

2)  Borrower agrees with Bank that Borrower shall rest the Line of Credit facility with no outstanding principal balance for a minimum of thirty (30) consecutive days during the term of the loan.

Dated: March 20, 2002

NUTECH DIGITAL, INC.
By:	/s/    LEE KASPER
	Lee Kasper, President

19

COMMERCIAL GUARANTY

References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.

Borrower:	NUTECH DIGITAL, INC. 15210 KESWICK STREET VAN NUYS, CA 91405	Lender:	U.S. Bank National Association 15910 Ventura Boulevard Encino, CA 91436
Guarantor:	LEE KASPER 15210 KESWICK STREET VAN NUYS CA 91405

AMOUNT OF GUARANTY.    The amount of this Guaranty is Unlimited.

CONTINUING UNLIMITED GUARANTY.    For good and valuable consideration, LEE KASPER (“Guarantor”) absolutely and unconditionally guarantees and promises to pay to U.S. Bank National Association (“Lender”) or its order, on demand, in legal tender of the United States of America, the Indebtedness (as that term is defined below) of NUTECH DIGITAL, INC. (“Borrower”) to Lender on the terms and conditions set forth in this Guaranty. Under this Guaranty, the liability of Guarantor is unlimited and the obligations of Guarantor are continuing.

DEFINITIONS.    The following words shall have the following meanings when used in this Guaranty;

Borrower.    The word “Borrower” means NUTECH DIGITAL, INC.

Guarantor.    The word “Guarantor” means LEE KASPER.

Guaranty.    The word “Guaranty” means this Guaranty made by Guarantor for the benefit of Lender dated March 20, 2001.

Indebtedness.    The word “Indebtedness” is used in its most comprehensive sense and means and includes any and all of Borrower’s liabilities, obligations, debts, and indebtedness to Lender, now existing or hereinafter incurred or created, including, without limitation, all loans, advances, interest, costs, debts, overdraft indebtedness, credit card indebtedness, lease obligations, other obligations, and liabilities of Borrower, or any of them, and any present or future judgments against Borrower, or any of them; and whether any such Indebtedness is voluntarily or involuntarily incurred, due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined; whether Borrower may be liable individually or jointly with others, or primarily or secondarily, or as guarantor or surety; whether recovery on the Indebtedness may be or may become barred or unenforceable against Borrower for any reason whatsoever; and whether the Indebtedness arises from transactions which may be voidable on account of infancy, insanity, ultra vires, or otherwise.

Lender.    The word “Lender” means U.S. Bank National Association, its successors and assigns.

Related Documents.    The words “Related Documents” mean and include without limitation all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, and ail other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness.

NATURE OF GUARANTY.    Guarantor’s liability under this Guaranty shall be open and continuous for so long as this Guaranty remains in force. Guarantor intends to guarantee at all times the performance and prompt payment when due, whether at maturity or earlier by reason of acceleration or otherwise, of all Indebtedness. Accordingly, no payments made upon the Indebtedness will discharge or diminish the continuing liability of Guarantor in connection with any remaining portions of the Indebtedness or any of the Indebtedness which subsequently arises or is thereafter incurred or contracted. Any married person who signs this Guaranty hereby expressly agrees that recourse may be had against both his or her separate property and community property.

DURATION OF GUARANTY.    This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full force until all Indebtedness incurred or contracted before receipt by Lender of any notice of revocation shall have been fully and finally paid and satisfied and all other obligations of Guarantor under this Guaranty shall have been performed in full. If Guarantor elects to revoke this Guaranty, Guarantor may only do so in writing. Guarantor’s written notice of revocation must be mailed to Lender, by certified mail, at the address of Lender listed above or such other place as Lender may designate in writing. Written revocation of this Guaranty will apply only to advances or new Indebtedness created after actual receipt by Lender of Guarantor’s written revocation. For this purpose and without limitation, the term “new Indebtedness’ does not include Indebtedness which at the time of notice of revocation is contingent, unliquidated, undetermined or not due and which later becomes absolute, liquidated, determined or due. This Guaranty will continue to bind Guarantor for all indebtedness incurred by Borrower or committed by Lender prior to receipt of Guarantor’s written notice of revocation, including any extensions, renewals, substitutions or modifications of the Indebtedness. All renewals, extensions, substitutions, and modifications of the Indebtedness granted after Guarantor’s revocation, are contemplated under this Guaranty and, specifically will not be considered to be new Indebtedness. This Guaranty shall bind the estate of Guarantor as to Indebtedness created both before and after the death or incapacity of Guarantor, regardless of Lender’s actual notice of Guarantor’s death. Subject to the foregoing, Guarantor’s executor or administrator or other legal representative may terminate this Guaranty in the same manner in which Guarantor might have terminated it and with the same effect. Release of any other guarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under this Guaranty. A revocation received by Lender from any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty. The obligations of Guarantor under this Guaranty shall be in addition to any obligations of Guarantor, or any of them, under any other guaranties of the Indebtedness of Borrower or any other person heretofore or hereafter given to Lender unless such other guaranties are modified or revoked in writing; and this Guaranty shall not, unless herein provided, affect, invalidate, or supersede any such other guaranty. It is anticipated that fluctuations may occur in the aggregate amount of Indebtedness covered by this Guaranty, and it is specifically acknowledged and agreed by Guarantor that reductions in the amount of Indebtedness, even to zero dollars ($0.00), prior to written revocation of this Guaranty by Guarantor shall not constitute a termination of this Guaranty. This Guaranty is binding upon Guarantor and Guarantor’s heirs, successors and assigns so long as any of the guaranteed Indebtedness remains unpaid and even though the Indebtedness guaranteed may from time to time be zero dollars ($0.00).

GUARANTOR’S AUTHORIZATION TO LENDER.    Guarantor authorizes Lender, either before or after any revocation hereof, without notice or demand and without lessening Guarantor’s liability under this Guaranty, from time to time: (a) prior to revocation as set forth above, to make one or more additional secured or unsecured loans to Borrower, to lease equipment or other goods to Borrower, or otherwise to extend additional credit to Borrower; (b) to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of the Indebtedness or any part of the Indebtedness, including increases and decreases of the rate of interest on the Indebtedness; extensions may be repeated and may be for longer than the original loan term; (c) to take and hold security for the payment of this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fall or decide not to perfect, and release any such security, with or without the substitution of new collateral; (d) to release, substitute, agree not to sue, or deal with anyone or more of Borrower’s sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (e) to determine how, when and what application of payments and credits shall be made on the Indebtedness; (f) to apply such security and direct the order or manner of sale thereof, including without limitation, any nonjudicial sale permitted by the terms of the controlling security agreement or deed of trust, as Lender in its discretion may determine; (g) to sell, transfer, assign, or grant participations in all or any part of the Indebtedness; and (h) to assign or transfer this Guaranty in whole or in part.

GUARANTOR’S REPRESENTATIONS AND WARRANTIES.    Guarantor represents and warrants to Lender that (a) no representations or agreements of any kind have been made to Guarantor which could limit or qualify in any way the terms of this Guaranty; (b) this Guaranty is executed at Borrower’s request and not at the request of Lender; (c) Guarantor has lull power, right and authority to enter into this Guaranty; (d) the provisions of this Guaranty do not conflict with or result in a default under any agreement or other instrument binding upon Guarantor and do not result in a violation of any law, regulation, court decree or order applicable to Guarantor; (e) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of all or substantially all of Guarantor’s assets, or any interest therein; (f) upon Lender’s request, Guarantor will provide to Lender financial and credit information in form acceptable to Lender, and all such financial information which currently has been, and all future financial information which will be provided to Lender is and will be true and correct in all material respects and fairly present the financial condition of Guarantor as of the dates the financial information is provided; (g) no material adverse change has occurred in Guarantor’s financial condition since the date of the most recent financial statements provided to Lender and no event has occurred which may materially adversely affect Guarantor’s financial condition; (h) no litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Guarantor is pending or threatened; (i) Lender has made no representation to Guarantor as to the creditworthiness of Borrower; and (j) Guarantor has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrower’s financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events, or circumstances, which might in any way affect Guarantor’s risks under this Guaranty, and Guarantor further agrees that, absent a request for information, Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender in the course of its relationship with Borrower.

GUARANTOR’S WAIVERS.    Except as prohibited by applicable raw, Guarantor waives any right to require Lender to (a) make any presentment, protest, demand, or notice of any kind, including notice of change of any terms of repayment of the Indebtedness, default by Borrower or any other guarantor or surety, any action or nonaction taken by Borrower, Lender, or any other guarantor or surety of Borrower, or the creation of new or additional Indebtedness; (b) proceed against any person, including Borrower, before proceeding against Guarantor; (c) proceed against any collateral for the Indebtedness, including Borrower’s collateral, before proceeding against Guarantor; (d) apply any payments or proceeds received against the Indebtedness in any order; (e) give notice of the terms, time, and place of any sale of the collateral pursuant to the Uniform Commercial Code or any other law governing such sale; (f) disclose any information about the Indebtedness, the Borrower, the collateral, or any other guarantor or surety, or about any action or nonaction of Lender; or (g) pursue any remedy or course of action in Lender’s power whatsoever.

Guarantor also waives any and all rights or defenses arising by reason of (h) any disability or other defense of Borrower, any other guarantor or surety or any other person; (i) the cessation from any cause whatsoever, other than payment in full, of the Indebtedness; (j) the application of proceeds of the indebtedness by Borrower for purposes other than the purposes understood and intended by Guarantor and Lender; (k) any act of omission or commission by Lender which directly or indirectly results in or contributes to the discharge of Borrower or any other guarantor or surety, or the Indebtedness, or the loss or release of any collateral by operation of law or otherwise; (I) any statute of limitations in any action under this Guaranty or on the Indebtedness; or (m) any modification or change in terms of the Indebtedness, whatsoever, including without limitation, the renewal, extension, acceleration, or other change in the time payment of the Indebtedness is due and any change in the interest rate, and including any such modification or change in terms after revocation of this Guaranty on Indebtedness incurred prior to such revocation.

Guarantor waives any rights and any defenses arising out of an election of remedies by Lender even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed Guarantor’s rights of subrogation and reimbursement against Borrower by operation of Section 580d of the California Code of Civil Procedure or otherwise.

Guarantor waives all rights and defenses that Guarantor may have because Borrower’s obligation is secured by real property. This means among other things: (1) Lender may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower. (2) If Lender forecloses on any real property collateral pledged by Borrower: (A) The amount of Borrower’s obligation may be reduced only by the price for which the collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price. (B) Lender may collect from Guarantor even if Lender, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Borrower. This is an unconditional waiver of any rights and defenses Guarantor may have because Borrower’s obligation is secured by real property. These rights and defenses include, but are not limited to, any rights and defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure.

Guarantor understands and agrees that the foregoing waivers are waivers of substantive rights and defenses to which Guarantor might otherwise be entitled under state and federal law. The rights and defenses waived include, without limitation, those provided by California laws of suretyship and guaranty, anti-deficiency laws, and the Uniform Commercial Code. Guarantor acknowledges that Guarantor has provided these waivers of rights and defenses with the intention that they be fully relied upon by Lender. Until all Indebtedness is paid in full, Guarantor waives any right to enforce any remedy Lender may have against Borrower or any other guarantor, surety, or other person, and further, Guarantor waives any right to participate in any collateral for the Indebtedness now or hereafter held by Lender.

If now or hereafter (a) Borrower shall be or become insolvent, and (b) the Indebtedness shall not at all times until paid be fully secured by collateral pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor of Lender and Borrower, and their respective successors, any claim or right to payment Guarantor may now have or hereafter have or acquire against Borrower, by subrogation or otherwise, so that at no time shall Guarantor be or become a “creditor” of Borrower within the meaning of 11 U.S.C. section 547(b), or any successor provision of the Federal bankruptcy laws.

GUARANTOR’S UNDERSTANDING WITH RESPECT TO WAIVERS.    Guarantor warrants and agrees that each of the waivers set forth above is made with Guarantor’s full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy.

LENDER’S RIGHT OF SETOFF.    In addition to all liens upon and rights of setoff against the moneys, securities or other property of Guarantor given to Lender by law, Lender shall have, with respect to Guarantor’s obligations to Lender under this Guaranty and to the extent permitted by law, a contractual security interest in and a right of setoff against, and Guarantor hereby assigns, conveys, delivers, pledges, and transfers to Lender all of Guarantor’s right, title and interest in and to, all deposits, moneys, securities and other property of Guarantor now or hereafter in the possession of or on deposit with Lender, whether held in a general or special account or deposit, whether held jointly with someone else, or whether held for safekeeping or otherwise, excluding however all IRA, Keogh, and trust accounts. Every such security interest and right of setoff may be exercised without demand upon or notice to Guarantor. No security interest or right of setoff shall be deemed to have been waived by any act or conduct on the part of Lender or by any neglect to exercise such right of setoff or to enforce such security interest or by any delay in so doing. Every right of setoff and security interest shall continue in full force and effect until such right of setoff or security interest is specifically waived or released by an instrument in writing executed by Lender.

SUBORDINATION OF BORROWER’S DEBTS TO GUARANTOR.    Guarantor agrees that the Indebtedness of Borrower to Lender, whether now existing or hereafter created, shall be prior to any claim that Guarantor may now have or hereafter acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may now or hereafter have against Borrower. In the event of Insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first applied by Lender to the Indebtedness of Borrower to Lender. Guarantor does hereby assign to Lender all claims which it may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender hereby is authorized, in the name of Guarantor, from time to time to execute and file financing statements and continuation statements and to execute such other documents and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty.

MISCELLANEOUS PROVISIONS.    The following miscellaneous provisions are a part of this Guaranty:

Integration, Amendment.    Guarantor warrants, represents and agrees that this Guaranty, together with any exhibits or schedules incorporated herein, fully incorporates the agreements and understandings of Guarantor with Lender with respect to the subject matter hereof and all prior negotiations, drafts, and other extrinsic communications between Guarantor and Lender shall have no evidentiary effect whatsoever. Guarantor further agrees that Guarantor has read and fully understands the terms of this Guaranty; Guarantor has had the opportunity to be advised by Guarantor’s attorney with respect to this Guaranty; the Guaranty fully reflects Guarantor’s intentions and parol evidence is not required to interpret the terms of this Guaranty. Guarantor hereby indemnifies and holds Lender harmless from all losses, claims, damages, and costs (including Lender’s attorneys’ fees) suffered or incurred by Lender as a result of any breach by Guarantor of the warranties, representations and agreements of this paragraph. No alteration or amendment to this Guaranty shall be effective unless given in writing and signed by the parties sought to be charged or bound by the alteration or amendment.

Applicable Law.    This Guaranty has been delivered to Lender and accepted by Lender in the Stale of California. If there is a lawsuit, Guarantor agrees upon Lender’s request to submit to the jurisdiction of the courts of Sacramento County, State of California. Subject to the provisions on arbitration, this Guaranty shall be governed by and construed in accordance with the laws of the State of California.

Arbitration.    Lender and Guarantor agree that all disputes, claims and controversies between them, whether individual, joint, or class in nature, arising from this Guaranty or otherwise, including without limitation contract and tort disputes, shall be arbitrated pursuant to the Rules of the American Arbitration Association, upon request of either party. No act to take or dispose of any Collateral shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, without limitation, obtaining injunctive relief or a temporary restraining order; invoking a power of sale under any deed of trust or mortgage; obtaining a writ of attachment or imposition of a receiver; or exercising any rights relating to personal property, including taking or disposing of such property with or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, or controversies concerning the lawfulness or reasonableness of any act, or exercise of any right, concerning any Collateral, including any claim to rescind, reform, or otherwise modify any agreement relating to the Collateral, shall also be arbitrated, provided however that no arbitrator shall have the right or the power to enjoin or restrain any act of any party. Lender and Guarantor agree that in the event of an action for judicial foreclosure pursuant to California Code of Civil Procedure Section 726, or any similar provision in any other state, the commencement of such an action will not constitute a waiver of the right to arbitrate and the court shall refer to arbitration as much of such action, including counterclaims, as lawfully may be referred to arbitration. Judgment upon any award rendered by any arbitrator may be entered in any court having jurisdiction. Nothing in this Guaranty shall preclude any party from seeking equitable relief from a court of competent jurisdiction. The statute of limitations, estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in an action brought by a party shall be applicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action for these purposes. The Federal Arbitration Act shall apply to the construction, interpretation, and enforcement of this arbitration provision.

Attorneys’ Fees; Expenses.    Guarantor agrees to pay upon demand all of Lender’s costs and expenses, including attorneys’ fees and Lender’s legal expenses, incurred in connection with the enforcement of this Guaranty. Lender may pay someone else to help enforce this Guaranty, and Guarantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender’s attorneys’ fees and legal expenses whether or not there is a lawsuit, including attorneys’ fees and legal expenses for bankruptcy proceedings (and including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Guarantor also shall pay all court costs and such additional fees as may be directed by the court.

Notices.    All notices required to be given by either party to the other under this Guaranty shall be in writing, may be sent by telefacsimile (unless otherwise required by law), and, except for revocation notices by Guarantor, shall be effective when actually delivered or when deposited with a nationally recognized overnight courier, or when deposited in the United States mail, first class postage prepaid, addressed to the party to whom the notice is to be given at the address shown above or to such other addresses as either party may designate to the other in writing. All revocation notices by Guarantor shall be in writing and shall be effective only upon delivery to Lender as provided above in the section titled “DURATION OF GUARANTY.” If there is more than one Guarantor notice to any Guarantor will constitute notice to all Guarantors. For notice purposes, Guarantor agrees to keep Lender informed at all times of Guarantor’s current address.

Interpretation.    In all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall be deemed have been used in the plural where the context and construction so require; and where there is more than one Borrower named in this Guaranty or when this Guaranty is executed by more than one Guarantor, the words “Borrower” and “Guarantor” respectively shall mean all and any one or more of them. The words “Guarantor,” “Borrower,” and “Lender” include the heirs, successors, assigns, and transferees of each of them. Caption headings in this Guaranty are for convenience purposes only and are not to be used to interpret or define the provisions of this Guaranty. If a court of competent jurisdiction finds any provision of this Guaranty to be invalid or unenforceable as to any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances, and all provisions of this Guaranty in all other respects shall remain valid and enforceable. If any one or more Borrower or Guarantor are corporations or partnerships, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or of the officers, directors, partners, or agents acting or purporting to act on their behalf, and any Indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Guaranty.

Waiver.    Lender shall not be deemed to have waived any rights under this Guaranty unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Guaranty shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with that provision or any other provision of this Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any of Lender’s rights or of any of Guarantor’s obligations as of any future transactions. Whenever the consent of Lender is required under this Guaranty, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.

EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR’S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED “DURATION OF GUARANTY.” NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED MARCH 20, 2001.

25

GUARANTOR:
X	/s/    LEE KASPER
	LEE KASPER

LENDER:

U.S. Bank National Association

By:	/s/
	Authorized Officer

26

BUSINESS SECURITY AGREEMENT

This Business Security Agreement (“Agreement”) is made and entered into by the undersigned borrower, guarantor and/or other obligor/pledgor (the “Debtor”) in favor of U.S. BANK N.A. (the “ Bank”) as of the date set forth on the last page of this Agreement.

ARTICLE I.    SECURITY INTEREST

1.1    Grant of Security Interest.    Debtor hereby grants a security interest in and collaterally assigns the Collateral (defined below) to Bank to secure all of Debtor’s Obligations (defined below) to Bank. The intent of the parties hereto is that the Collateral secures all Obligations of Debtor to Bank, whether or not such Obligations exist under this Agreement or any other agreements, whether now or hereafter existing, between Debtor and Bank or in favor of Bank, including, without limitation, any note, any loan or security agreement, any lease, any mortgage, deed of trust or other pledge of an interest in real or personal property, any guaranty any letter of credit or banker’s acceptance, any agreement for any other services or credit extended by Bank to Debtor even though not specifically enumerated herein, and any other agreement with Bank (together and individually, the “Loan Documents”).

1.2    “Collateral”    means all of the following whether now owned or existing or hereafter acquired by Debtor (or by Debtor with spouse), wherever located (including all documents, general intangibles, additions and accessions, spare and repair parts, special tools, replacements, returned or repossessed goods and books and records relating to the following; and all proceeds, supporting obligations and products of the following) [check all that apply]:

x All accounts, instruments, documents, chattel paper, general intangibles, contract rights, investment property (including any securities entitlements and/or securities accounts held by Debtor), securities and certificates of deposit, deposit accounts, and letter of credit rights;

x All inventory:

x All equipment;

¨ All fixtures; and

¨ Specific Collateral (the following, whether constituting equipment, inventory, fixtures, or other collateral)                                                                       

In the event the first four boxes are checked, Debtor acknowledges and agrees that, in applying the law of any jurisdiction that at any time enacts all or

substantially all of the uniform provisions of Revised Article 9 of the Uniform Commercial Code (1999 Official Text), the foregoing collateral description covers all assets of Debtor. Bank may at any time and from time to time file financing and continuation statements and amendments thereto reflecting the same. Unless otherwise defined, the terms set forth in this Agreement shall have the meanings set forth in the Uniform Commercial Code as adopted in the Loan Documents and as amended from time to time. The defined terms hereunder shall be interpreted in a manner most favorable to Bank.

1.3    “Obligations” means all Debtor’s debts (except for consumer credit if Debtor is a natural person), liabilities, obligations, covenants, warranties, and duties to Bank (plus its affiliates including any credit card debt, but specifically excluding any type of consumer credit), whether now or hereafter existing or incurred, whether liquidated or unliquidated, whether absolute or contingent, whether arising out of the Loan Documents or otherwise, and all other debts and obligations due Bank under any lease, agricultural, real estate or other financing transaction and regardless of whether such financing is related in time or type to the financing provided at the time of grant of this security interest, and regardless of whether such Obligations arise out of existing or future credit granted by Bank to any Debtor, to any Debtor and others, to others guaranteed, endorsed or otherwise secured by any Debtor or to any debtor-in-possession or other successor-in-interest of any Debtor, and including principal, interest, fees, expenses and charges relating to any of the foregoing.

ARTICLE II.    WARRANTIES AND COVENANTS

In addition to all other warranties and covenants of Debtor under the Loan Documents which are expressly incorporated herein as, part of this Agreement and while any part of the credit granted Debtor under the Loan Documents is available or any Obligations of Debtor to Bank are unpaid or outstanding, Debtor continuously warrants and agrees as follows:

2.1    Debtor’s Name, Location; Notice of Location Changes.    Except as indicated in the Article 9 Certificate executed by Debtor and made a part hereof, Debtor’s name and organizational structure has remained the same during the past five (5) years. Debtor will continue to use only the name set forth with Debtor’s signature unless Debtor gives Bank prior written notice of any change. Furthermore, Debtor shall not do business under another name nor use any trade name without giving ten (10) days prior written notice to Bank. Debtor will not change its status or organizational structure without the prior written consent of Bank. Debtor will not change its location or registration (if Debtor is a registered organization) to another state without prior written notice to Bank. The address appearing in the Article 9 Certificate is Debtor’s chief executive office (or residence if Debtor is a sole proprietor).

2.2    Status of Collateral.    All Collateral is genuine and validly existing. Except for items of insignificant value or as otherwise reflected in writing by Debtor to Bank under

a borrowing base or otherwise, (i) Collateral constituting inventory, equipment and fixtures is in good condition, not obsolete and is either currently saleable or usable; and (ii) Collateral constituting accounts, contract rights, notes, chattel paper and other third-party obligations to pay is fully enforceable in accordance with its terms and not subject to return, dispute, setoff, credit allowance or adjustment, except for discounts for prompt payment. Unless Debtor provides Bank with written notice to the contrary, Debtor has no notice or knowledge of anything that would impair the ability of any third-party obligor to pay any debt to Debtor when due.

2.3    Ownership; Maintenance of Collateral; Restrictions on Liens and Dispositions.    Debtor is the sole owner of the Collateral free of all liens, claims, other encumbrances and security interests except as permitted in writing by Bank. Debtor shall: (i) maintain the Collateral in good condition and repair (reasonable wear and tear excepted), and not permit its value to be impaired; (ii) not permit waste, removal or loss of identity of the Collateral; (iii) keep the Collateral free from all liens, executions, attachments, claims, encumbrances and security interests (other than Bank’s paramount security interest and those permitted in writing by Bank); (iv) defend the Collateral against all claims and legal proceedings by persons other than Bank; (v) pay and discharge when due all taxes, levies and other charges or fees upon the Collateral except for payment of taxes contested by Debtor in good faith by appropriate proceedings so long as no levy or lien has been imposed upon the Collateral; (vi) not lease, sell or transfer the Collateral to any party nor move it to any new location outside of the ordinary course of business; (vii) not permit the Collateral, without the consent of Bank, to become a fixture or an accession to other goods; (viii) not permit the Collateral to be used in violation of any applicable law, regulation or policy of insurance; and, (ix) as to the Collateral consisting of instruments and chattel paper, preserve Bank’s rights in it against air other parties. Notwithstanding the above, Debtor may sell, lease or transfer inventory in the ordinary course of its business provided that no sale, lease or transfer shall include any transferor sale in satisfaction (partial or complete) of a debt owed by Debtor; title will not pass to buyer until Debtor physically delivers the goods to buyer or Debtor ships the goods F.O.B. to buyer’s destination; and sales and/or leases to Debtor’s affiliates shall be for fair market value, cash on delivery, with the proceeds remitted to Bank.

2.4    Maintenance of Security Interest; Purchase Money Security Interests.    Debtor shall take any action requested by Bank to preserve the Collateral and to establish the value of, the priority of, to perfect, to continue the perfection of or to enforce Bank’s interest in the Collateral and Bank’s rights under this Agreement; and shall pay all costs and expenses related thereto. Debtor shall also cooperate with Bank in obtaining control (for purposes of perfection under the Uniform Commercial Code) of Collateral consisting of deposit accounts, investment property, letter of credit rights, electronic chattel paper and any other collateral where Bank may obtain perfection through control. Debtor hereby authorizes Bank to take any and all actions described above and in place of Debtor with respect to the Collateral and hereby ratifies any such actions Bank has taken prior to the date of this Agreement and hereafter, which actions may include, without limitation, filing UCC financing statements and obtaining or attempting to obtain control

agreements from holders of the Collateral. Debtor and Bank intend to maintain the full effect of any purchase money security interest granted in favor of Bank notwithstanding the fact that the Collateral so purchased is also pledged as security for other Obligations under the Loan Documents.

2.5    Collateral Inspections; Modifications and Changes in Collateral.    At reasonable times, Bank may examine the Collateral and Debtor’s records pertaining to it, wherever located, and make copies of such records at Debtor’s expense; and Debtor shall assist Bank in so doing. Without Bank’s prior written consent, Debtor shall not alter, modify, discount, extend, renew or cancel any Collateral, except for ordinary discounts for prompt payment on accounts, physical modifications to the inventory occurring in the manufacturing process or alterations to equipment which do not materially affect its value. Debtor shall promptly notify Bank in writing of any material change in the condition of the Collateral and of any change in location of the Collateral.

2.6    Collateral Records, Reports and Statements.    Debtor shall keep accurate and complete records respecting the Collateral in such form as Bank may approve. At such times as Bank may require, Debtor shall furnish to Bank any records/information Bank might require, including, without limitation, a statement certified by Debtor and in such form and containing such information as may be prescribed by Bank showing the current status and value of the Collateral.

2.7    Chattel Paper, Instruments, Etc.    Chattel paper, instruments, drafts, notes, acceptances, and other documents which constitute Collateral shall be on forms satisfactory to Bank. Debtor shall promptly mark chattel paper to indicate conspicuously Bank’s security interest therein, shall not deliver any chattel paper or negotiable instruments to any other entity and, upon request, shall deliver any original chattel paper, instruments, drafts, notes, acceptances and other documents which constitute Collateral to Bank.

2.8    United States Government Contracts.    If any accounts or contract rights arose out of contracts with the United States or any of its departments, agencies or instrumentalities, Debtor shall promptly notify Bank and execute any writings required by Bank so that any money due or to become due under such contracts shall be assigned to Bank under the Federal Assignment of Claims Act.

2.9    Environmental Matters.    Except as disclosed in a written schedule attached to this Agreement (if no schedule is attached, there are no exceptions), there exists no uncorrected violation by Debtor of any federal, state or local laws (including statutes, regulations, ordinances or other governmental restrictions and requirements) relating to the discharge of air pollutants, water pollutants or process waste water or otherwise relating to the environment or Hazardous Substances as hereinafter defined, whether such laws currently exist or are enacted in the future (collectively “Environmental Laws’). The term “Hazardous Substances” shall mean any hazardous or toxic wastes, chemicals or other substances, the generation, possession or existence of which is prohibited or governed by any Environmental Laws. Debtor is not subject to any judgment, decree,

order or citation, or a party to (or threatened with) any litigation or administrative proceeding, which asserts that Debtor (i) has violated any Environmental Laws; (ii) is required to clean up, remove or take remedial or other action with respect to any Hazardous Substances (collectively “Remedial Action”); or (iii) is required to pay all or a portion of the cost of any Remedial Action, as a potentially responsible party. There are not now, nor to Debtor’s knowledge after reasonable investigation have there ever been, any Hazardous Substances (or tanks or other facilities for the storage of Hazardous Substances) stored, deposited, recycled or disposed of on, under or at any real estate owned or occupied by Debtor during the periods that Debtor owned or occupied such real estate, which if present on the real estate or in soils or ground water, could require Remedial Action. To Debtor’s knowledge, there are no proposed or pending changes in Environmental Laws which would adversely affect Debtor or its business, and there are no conditions existing currently or likely to exist while the Loan Documents are in effect which would subject Debtor to Remedial Action or other liability. Debtor currently complies with and will continue to timely comply with all applicable Environmental Laws; and will provide Bank, immediately upon receipt, copies of any correspondence, notice, complaint, order or other document from any source asserting or alleging any circumstance or condition which requires or may require a financial contribution by Debtor or Remedial Action or other response by or on the part of Debtor under Environmental Laws, or which seeks damages or civil, criminal or punitive penalties from Debtor for an alleged violation of Environmental Laws.

2.10    Insurance.    Debtor will maintain insurance to such extent, covering such risks and with such insurers as is usual and customary for businesses operating similar properties, and as is satisfactory to Bank, including insurance for fire and other risks insured against by extended or comprehensive coverage, public liability insurance and workers’ compensation insurance; and will designate Bank as loss payee with a “Lender’s Loss Payable” endorsement on any casualty policies and take such other action as Bank may reasonably request to ensure that Bank will receive (subject to no other interests) the insurance proceeds of the Collateral. Debtor hereby assigns all insurance proceeds to and irrevocably directs, while any Obligations remain unpaid, any insurer to pay to Bank the proceeds of all such insurance and any premium refund; and authorizes Bank to endorse Debtor’s name to effect the same, to make, adjust or settle, in Debtor’s name, any claim on any insurance policy relating to the Collateral; and, at the option of Bank, to apply such proceeds and refunds to the Obligations or to restoration of the Collateral, returning any excess to Debtor. In the event of any failure of the Debtor to obtain or maintain any insurance required hereunder, the Bank shall have the authority, but not the obligation, to obtain any such insurance coverage, and the Debtor shall immediately reimburse the Bank for the cost thereof, together with interest on such amount at the highest rate of interest then accruing on any of the Obligations.

ARTICLE III.    COLLECTIONS

3.1    Deposit with Bank.    At any time Bank may require that all proceeds of Collateral received by Debtor shall be held by Debtor upon an express trust for Bank, shall not be commingled with any other funds or property of Debtor and shall be turned over to Bank in precisely the form received (but endorsed by Debtor, if necessary for collection) not

later than the business day following the day of their receipt. All proceeds of Collateral received by Bank directly or from Debtor shall be applied against the Obligations in such order and at such times as Bank shall determine.

ARTICLE IV.    RIGHTS AND DUTIES OF BANK

In addition to all other rights (including setoff) and duties of Bank under the Loan Documents which are expressly incorporated herein as a part of this Agreement, the following provisions shall also apply:

4.1    Authority to Perform for Debtor.    Debtor presently appoints any officer of Bank as Debtor’s attorney-in-fact (coupled with an interest and irrevocable while any Obligations remain unpaid to do any of the following upon default by Debtor hereunder (notwithstanding any notice requirements or grace/cure periods under this or other agreements between Debtor and Bank): (i) to file, endorse or place the name of Debtor on any invoice or document of title relating to accounts, drafts against customers, notices to customers, notes, acceptances, assignments of government contracts, instruments, financing statements, checks, drafts, money orders, insurance claims or payments or other documents evidencing payment or a security interest relating to the Collateral; (ii) to receive, open and dispose of all mail addressed to Debtor and to notify the Post Office authorities to change the address for delivery of mail addressed to Debtor to an address designated by Bank; (iii) to do all such other acts and things necessary to carry out Debtor’s duties under this Agreement and the other loan Documents; and (iv) to perfect, protect and/or realize upon Bank’s interest in the Collateral. If the Collateral includes funds or property in depository accounts, Debtor authorizes each of its depository institutions to remit to Bank, without liability to Debtor, all of Debtor’s funds on deposit with such institution upon written direction by Bank after default by Debtor hereunder. All acts by Bank are hereby ratified and approved, and Bank shall not be liable for any acts of commission or omission, nor for any errors of judgment or mistakes of fact or law.

4.2    Verification and Notification; Bank’s Rights.    Bank may verify Collateral in any manner, and Debtor shall assist Bank in so doing. Upon the occurrence of a default hereunder, Bank may at any time and Debtor shall, upon request of Bank, notify the account debtors to make payment directly to Bank; and Bank may enforce collection of, sell, settle, compromise, extend or renew the indebtedness of such account debtors; all without notice to or the consent of Debtor. Until account debtors are so notified, Debtor, as agent of Bank, shall make collections on the Collateral. Bank may at any time notify any bailee possessing Collateral to turn over the Collateral to Bank.

4.3    Collateral Preservation.    Bank shall use reasonable care in the custody and preservation of any Collateral in its physical possession but in determining such standard of reasonable care, Debtor expressly acknowledges that Bank has no duty to: (i) insure the Collateral against hazards; (ii) ensure that the Collateral will not cause damage to property or injury to third parties; (iii) protect it from seizure, theft or conversion by third parties, third parties’ claims or acts of God; (iv) give to Debtor any notices received by Bank regarding the Collateral; (v) perfect or continue perfection of any security interest in favor of Debtor; (vi) perform any services, complete any work-in-process or take any

other action in connection with the management or maintenance of the Collateral; or (vii) sue or otherwise effect collection upon any accounts even if Bank shall have made a demand for payment upon individual account debtors. Notwithstanding any failure by Bank to use reasonable care in preserving the Collateral, Debtor agrees that Bank shall not be liable for consequential or special damages arising therefrom.

ARTICLE V.    DEFAULTS AND REMEDIES

Bank may enforce its rights and remedies under this Agreement upon default. A default shall occur if Debtor fails to comply with the terms of any Loan Documents (including this Agreement or any guaranty by Debtor) a demand for payment is made under a demand loan, or any other obligor fails to comply with the terms of any Loan Documents for which Debtor has given Bank a guaranty or pledge.

5.1    Cumulative Remedies; Notice; Waiver.    In addition to the remedies for default set forth in the Loan Documents, Bank upon default shall have all other rights and remedies for default provided by the Uniform Commercial Code, as well as any other applicable law and this Agreement, INCLUDING, WITHOUT LIMITATION, THE RIGHT TO REPOSSESS, RENDER UNUSABLE AND/OR DISPOSE OF THE COLLATERAL WITHOUT JUDICIAL PROCESS. The rights and remedies specified herein are cumulative and are not exclusive of any rights or remedies which Bank would otherwise have. With respect to such rights and remedies:

(a)  Assembling Collateral; Storage; Use of Debtor’s Name/Other Property.    Bank may require Debtor to assemble the Collateral and to make it available to Bank at any convenient place designated by Bank. Debtor recognizes that Bank will not have an adequate remedy in law if this obligation is breached and accordingly, Debtor’s obligation to assemble the Collateral shall be specifically enforceable. Bank shall have the right to take immediate possession of said Collateral and Debtor irrevocably authorizes Bank to enter any of the premises wherever said Collateral shall be located, and to store, repair, maintain, assemble, manufacture, advertise and sell, lease or dispose of (by public sale or otherwise) the same on said premises until sold, all without charge or rent to Bank. Bank is hereby granted an irrevocable license to use, without charge, Debtor’s equipment, inventory, labels, patents, copyrights, franchises, names, trade secrets, trade names, trademarks and advertising matter and any property of a similar nature; and Debtor’s rights under all licenses and franchise agreements shall inure to Bank’s benefit. Further, Debtor releases Bank from obtaining a bond or surety with respect to any repossession and/or disposition of the Collateral.

(b)  Notice of Disposition.    Written notice, when required by law, sent to any address of Debtor in this Agreement, at least five (5) calendar days (counting the day of sending) before the date of a proposed disposition of the Collateral is reasonable notice but less notice may be reasonable under the circumstances. Notification to account debtors by Bank shall not be deemed a disposition of the Collateral. Notice of any record shall be deemed delivered when the record has been (a) deposited in the United States Mail, postage pre-paid, (b) received by overnight delivery service, (c) received by telex, (d) received by telecopy, (e) received through the internet, or (f) when personally delivered.

(c)  Possession of Collateral/Commercial Reasonableness.    Bank shall not, at any time, be obligated to either take or retain possession or control of the Collateral. With respect to Collateral in the possession or control of Bank, Debtor and Bank agree that as a standard for determining commercial reasonableness, Bank need not liquidate, collect, sell or otherwise dispose of any of the Collateral if Bank believes, in good faith, that disposition of the Collateral would not be commercially reasonable, would-subject Bank to third-party claims or liability, that other potential purchasers could be attracted or that a better price could be obtained if Bank held the Collateral for up to 2 years. Bank may sell Collateral without giving any warranties and may specifically disclaim any warranties of title or the like. Furthermore, Bank may sell the Collateral on credit (and reduce the Obligations only when payment is received from the buyer), at wholesale and/or with or without an agent or broker; and Bank need not complete, process, repair, clean-up or otherwise prepare the Collateral prior to disposition. If the purchaser fails to pay for the Collateral, Bank my resell the Collateral and Debtor shall be credited with the cash proceeds of the sale. Bank may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.

(d)  Waiver by Debtor.    Bank has no obligation and Debtor waives any obligation to attempt to satisfy the Obligations by collecting the obligations from any third parties and Bank may release, modify or waive any collateral provided by any third party to secure any of the Obligations, all without affecting Bank’s rights against Debtor. Debtor further waives any obligation on the part of Bank to marshal any assets in favor of Debtor or in payment of the Obligations. Notwithstanding any provisions in this Agreement or any other agreement between Debtor and Bank, Debtor does not waive any statutory rights except to the extent that the waiver thereof is permitted by law.

(e)  Waiver by Bank.    Bank may permit Debtor to attempt to remedy any default without waiving its rights and remedies hereunder, and Bank may waive any default without waiving any other subsequent or prior default by Debtor. Furthermore, delay on the part of Bank in exercising any right, power or privilege hereunder or at law shall not operate as a waiver thereof, nor shall any single or partial exercise of such right, power or privilege preclude other exercise thereof or the exercise of any other right, power or privilege. No waiver or suspension shall be deemed to have occurred unless Bank has expressly agreed in writing specifying. such waiver or suspension.

ARTICLE VI.    MISCELLANEOUS

All other provisions in the Loan Documents are expressly incorporated as a part of this Agreement.

All documents attached hereto, including any appendices, schedules, riders, and exhibits to this Agreement, are hereby expressly incorporated by reference.

IN WITNESS WHEREOF, the undersigned has/have executed this BUSINESS SECURITY AGREEMENT as MARCH 20, 2002.

(Individual Debtor)			NUTECH DIGITAL, INC.
			Debtor Name (Organization)
		(SEAL)	a	CALIFORNIA Corporation
			By:	/s/    LEE KASPER
Debtor Name	N/A
			Name and Title:		Lee Kasper, President
		(SEAL)
			By:
Debtor Name	N/A		Name and Title:

INSURANCE COVERAGE FOR THE BENEFIT OF THE BANK

TO:    INSURANCE AGENT	OWNER:
PCPP4006078	NUTECH DIGITAL, INC
Policy Number	Name
310-207-7737	15210 KESWICK STREET
Telephone Number	Address
COAST INSURANCE AGENCY	VAN NUYS, CA 91405
Insurance Company Name	City        State        Zip Code
Insurance Agent’s Name

11611 SAN VICENTE BLVD., SUITE 720
Address
LOS ANGELES,	CA	90049
City	State	Zip Code

As set forth below, this is a request and authorization that you name U.S. BANK N.A. (“the Bank”) as “Lenders Loss Payee” and/or “Mortgage Payee” under our property coverage from COAST INSUARANCE AGENCY (insert name of insurance company as follows:

(Fill Out the Appropriate Sections)

x    Lenders Loss Payee on all our tangible personal property (inventory/equipment) in the minimum amount of $50,000.00 and on any Business Interruption Insurance we have bound.

¨    Lenders Loss Payee on that equipment described below or on the attached sheet in the minimum amount of $                        

¨    Lenders Loss Payee on motor vehicles up to their insurable value, as described below or on the attached sheet.

Year	Make	Model	VIN/Serial #
Year	Make	Model	VIN/Serial #

¨    Mortgage Payee on real estate at the following locations with coverage in the amounts specified:

	$
Address                                                               City                             State	Amount of Coverage

	$
Address                City                State	Amount of Coverage
	$
Address                City                State	Amount of Coverage

The Bank will require a binder or certificate showing such coverage and listing the Bank as Lenders Loss Payee and/or Mortgage Payee as stated above, or, alternatively, please provide the Bank with language from the policy showing its “Lender Loss Payee” and/or “Mortgage Payee” coverage. Such coverage should insure that the Bank is paid in the event of loss despite any neglect on our part, and that the Bank is given prior notice of cancellation.

Lastly, the Bank requires that there be no other loss payee and/or mortgage payee on its collateral without its consent. If there presently exists any other loss payee and/or mortgage payee on such collateral, please itemize such parties and their insured collateral on a separate attachment.

Please send the binder/certificate and any applicable loss payee/mortgage list to:

U.S. Bank N.A.

Attn:    Corporate Loan Servicing Center

            Commercial Collateral

#651730594318/26

555 SW Oak PD_OR_P7LD

Portland, OR 97204

Please direct any questions regarding this request to: 1-503-275-7136.

Thank you for your assistance.

Nutech Digital, Inc.

(Owner Name)

By:         /s/    LEE KASPER

          (Owner’s Signature)

Name and Title: Lee Kasper, President

(For Company Only)

EX-23.0

[LETTERHEAD OF MOFFITT & COMPANY, P.C.]

CONSENT OF INDEPENDENT

CERTIFIED PUBLIC ACCOUNTANTS

NuTech Digital, Inc.

Van Nuys, California

We consent to the use in registration statement on Form SB-2 and the pre-effective amendment No. 1 of our report dated March 2, 2002, as reissued on June 14, 2002 relating to the audit of your financial statements as of December 31, 2001 and 2002 and our report dated April 23, 2002, as reissued on June 14, 2002 relating to the reviewed financial statements as of March 31, 2002 and for the three months ended March 31, 2002 and 2001.

/s/    MOFFITT & COMPANY, P.C.

Moffitt & Company, P.C.

Scottsdale, Arizona

July 12, 2002